Blizzard Entertainment, the creator of huge video-game franchises such as "Overwatch," "World of Warcraft," and "Hearthstone," is undergoing a big round of layoffs.

The layoffs will ultimately affect some 800 employees across Activision-Blizzard, representing some 8% of its workforce.

Activision Blizzard, the parent company of Blizzard, has seen its stock lose almost half its value since October 2018.

Read the full memo to Blizzard employees below.

Blizzard Entertainment, one of the biggest names in the video game business, has begun a significant round of layoffs. The move confirms earlier reports from Bloomberg.

On its quarterly earnings call on Tuesday afternoon, parent company Activision-Blizzard announced that it would lay off 8% of of its workforce, representing some 800 out of about 9,600 total jobs. The layoffs were first reported by Kotaku, and appear to primarily affect Blizzard itself.

The layoffs will ultimately affect every part of Activision-Blizzard, including "Call of Duty" publisher Activision, "Candy Crush Saga" maker King, and Blizzard itself, which is responsible for flagship gaming franchises including "World of Warcraft," "Overwatch," "Hearthstone," and "Diablo."

The news comes after Activision-Blizzard reported mixed results for its holiday quarter, and gave guidance that fell short of Wall Street expectations. While earnings were ahead of expectations, revenue fell short. Shares of Activision-Blizzard have just about halved since October 2018.

"In-game execution was inadequate in some of our franchises, and we saw weaker-than-anticipated retail demand," Activision-Blizzard CEO Bobby Kotick told investors on the earnings call, according to CNBC.

Despite owning a catalog of fan-favorite titles including "World of Warcraft," "Diablo 3," and "Destiny 2," Blizzard has seen some of its thunder stolen by free-to-play newcomers like "Fortnite" and "Apex Legends." Meanwhile, "Overwatch," Blizzard's newest franchise, was a smash hit when it landed in 2016, but has slowly lost ground to rival titles with more frequent updates, including "Call of Duty" and "Rainbow Six: Siege."

A memo to employees

In a memo to staff obtained by Business Insider sent before the earnings call, Blizzard President J. Allen Brack promised an "comprehensive severance package" to affected employees. The memo says that managers have begun notifying affected employees if they're affected by the layoffs.

In a separate blog post released to the public, J. Allen Brack reassured fans that Blizzard isn't slowing down on game development.

"With that in mind, we have plans to add to game development," he wrote. "We are dedicated to bringing you more content across existing game franchises and bringing our unannounced projects to life.

A person close to the company previously told Kotaku's Jason Schrier that the layoffs are expected to hit Blizzard’s esports and publishing divisions especially hard. Blizzard has spent the last several years supporting professional competition for its most popular games, including “Overwatch,” “Hearthstone,” and “Starcraft.“

Notably, it seems that Blizzard esports head Amy Morhaime left the company in December, according to her LinkedIn. That came just months after Blizzard cofounder Mike Morhaime, her husband, announced that he would step down as president of the company. Morhaime is staying on as a strategic advisor to Blizzard through April.

Beyond Amy Morhaime and Mike Morhaime, Activision Blizzard has lost other key executives, including CFO Spencer Neumann. More recently, Activision Blizzard sold the commercial rights to flagship online shooter "Destiny 2," in a mutual agreement after the game's developer, Bungie, opted to split from the company.

Activision Blizzard cited underwhelming sales for the "Destiny 2: Forsaken" expansion as one of the reasons the company underperformed during the third quarter of 2018. In that quarter, the video game publisher reported a 5% decline in earnings over the same period of 2017, and revenue over the same quarter declined by 6.6% to $1.151 billion.

Blizzard has reportedly been working to cut costs since early last year. Employees at Blizzard told Kotaku that they were repeatedly told to reduce spending by former CFO Amrita Ahuja, who left in January 2019. In December, Eurogamer reported that Blizzard negotiated buyouts for more than 100 customer service employees based in Ireland.

Read the full memo from Blizzard president J. Allen Brack to employees:

Hello Blizzard....

Today is a difficult day, and I have some hard decisions to communicate.

The Blizzard leadership team and I have been talking a lot about how we want to build on Blizzard's legacy and what the priorities are for the company going forward. Our top priority is to continue making great games, and entertainment experiences. It's critical that we prioritize product development and grow the capacity of the teams doing this work to best serve our player community. We also need to evolve operationally to provide the best support for new and existing products. As a result, we've made the decision to change parts of the organization, which I'll share more about in a separate email later today.

Unfortunately, these changes come with a harder reality. Over the last few years, many of our non-development teams expanded to support various needs. Currently, staffing levels on some teams are out of proportion with our current release slate. This means we need to scale down some areas of our organization. I'm sorry to share that we will be parting ways with some of our colleagues in the U.S. today. In our regional offices, we anticipate similar evaluations, subject to local requirements.

There's no way to make this transition easy for impacted employees, but we are doing what we can to support our colleagues. In the U.S. we are offering a comprehensive severance package, extended health and benefits continuation, profit sharing for 2018, career coaching, and job search/placement assistance. These people are members of the Blizzard Family—they care deeply and contributed greatly to the work we are all committed to. We are extremely grateful for their contributions here at Blizzard.

Managers in the U.S. will meet with impacted employees this afternoon, and we will be following up with team meetings later today and tomorrow. The managing director in each regional office will provide an update to explain in detail what this means for employees in their respective locations.

I will also post a message to the community about the changes this afternoon, so our players understand that these measures do not affect our game development efforts, and are not related to any individual franchise. If anyone from the press or a fansite contacts you, please refer them to Rob Hilburger on the communications team.

This is a lot to take in, and it is not going to be easy. Let's do our best to support each other through this process. I know many of you will have questions. In addition to my follow-up note later today, I'll be hosting a fireside chat this Thursday to provide more details about the organizational changes. As always, in the meantime, reach out to me or any member of the exec team if you have questions.

JAB

Official comment from Activision-Blizzard:

Activision Blizzard achieved record GAAP revenue and EPS for both the fourth quarter and the year, and we also achieved record segment financial results across Activision and King in 2018. While we performed well in these areas of our business last year, and continued to make progress in mobile, advertising, and esports, we ultimately did not meet our own, nor our communities’, expectations for content delivery and growth.

As a result, we’re taking important steps to reinforce our foundation for future growth. We’re increasing our investment in game development across our biggest franchises, mobile and geographic expansion, as well as in adjacent opportunities with demonstrated potential, like esports and advertising.

Over the course of 2019, we plan to increase the number of developers working on our key franchises by approximately 20%, ultimately allowing us to put even more content into the hands of existing and new fans around the world.

To fund this investment, we are de-prioritizing initiatives that are not meeting our expectations and reducing certain non-development administrative expenses across the company. We are also bringing together our regional sales, partnerships, and sponsorships capabilities enabling us to better leverage our talent, expertise and scale.

We’re confident in our plan and the leadership teams in place who will navigate us through this time of change. These actions will allow us to return to the franchise focus that has fueled our long-term success so that we can bring the most epic entertainment to our players around the world.

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