Zynga Cutting Staff, Closing Offices

Zynga Cutting Staff, Closing OfficesIn late February game developer Zynga announced the company was cutting about 30 jobs and is closing or consolidating offices in New York, Texas and Baltimore. Zynga will focus on social games that can be profitable. Zynga Chief Operations Officer David Ko stated “While these decisions are always difficult, these steps will affect approximately 1 percent of our workforce and enable us to focus our resources on the most significant growth opportunities.”

In the meantime Zynga’s stock prices gained after Nevada announced the approval of online gambling regulations even though the company must clear many hurdles before Zynga can cash in on the legalization of online gaming in the US. Zynga’s attempts to enter the real money online gaming sector may be held back by US laws and regulations that favor existing casinos. In New Jersey Atlantic City casinos will control online gaming in the state. This could create big problems for Zynga which is trying to reduce its dependence on its current business model.

Currently Zynga offers ‘free to play’ games on Facebook that allow players to play the games for free but gives them the option to spend real money on virtual products and other in-game advantages.  In-game transactions are commonly referred to as “micro-transactions.” Zynga generates a large portion of its revenues from micro transactions. Investors became skittish after the company showed signs that the company had reached its growth potential limit with its free to play business model.

Last October Zynga announced plans to enter the online gambling industry. At the time Zynga seemed well positioned to take advantage of the opportunities offered by online gaming but the rules regulating the United States online gambling market may cause big problems for the company. Last August Zynga launched real money games in the UK on Facebook. Even though the move was successful Zynga is still cutting back. Currently Zynga employs about 3,000 people and is closing down two Texas offices and will relocate employees to offices in Dallas and North Austin. The company is also consolidating two offices in New York.

Last December Zynga filed a “preliminary finding of suitability” with the Nevada Gaming Control Board which is only the first step in obtaining a Nevada interactive gaming license. Zynga may face a difficult uphill battle since Las Vegas casinos have already partnered with European gaming firms to launch their online gaming operations. Casinos have also been given preference in the licensing process.

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