Rumor: The9 in Dire Financial Straits, Big Layoffs in Some Departments
C. Custer | On April 12, 2012 at 8:50 pm
Chinese game developer/publisher The9 (NASDAQ:NCTY) may be in some trouble. Rumors are floating around that the company has made big staff cuts — as much as 50 percent — in its technology and platform operations departments, and CEO Zhu Jun has even supposedly sold his stake in Shanghai Shenhua, Shanghai’s professional soccer team.
The layoff news comes from a former employee in the company’s tech department, who told reporters he was laid off along with 50 percent of his department because The9′s financial reports weren’t looking good. The9 has indeed been operating at a loss since 2009, when it lost the rights to operate World of Warcraft in China. In its most recent filings, for Q4 2011, the company reported a loss of 126 million RMB (about $20 million). The company has not confirmed the layoffs, although a rep did say that the rumors were exaggerated. Officially, the company says this:
In accordance with the needs of our business, The9 has recently begun strategic adjustments. We are optimizing operations programs and the relevant human-relations structures, and this optimization to increase the efficiency of the company is a necessary adjustment.
Yeah, that’s corporate-speak for: “We just fired a bunch of people.”
The potential light at the end of the tunnel for The9 is Firefall, an online shooter being developed by The9-owned Red 5 Studios. I’m not convinced the game will be able to fill the gaping hole in The9′s books, but the company has made some significant deals to distribute the game in other regions already, including a recent $10 million licensing agreement with Russia’s Innova Systems.
The game, which is currently in closed beta, has been impressing people who’ve gotten a chance to play it, and The9 is clearly hoping it makes a big splash. It probably will. But a $20-million-a-quarter-sized splash? That might be a lot to hope for.