The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( Trefis) -- Activision Blizzard ( ATVI) is laying off around 600 employees. The company said Wednesday that the cuts would occur in its Blizzard Entertainment unit, which runs the popular "World of Warcraft" (WoW) online fantasy game franchise. While Blizzard justified that the staff reductions are in sync with its current organizational needs, it's not certain whether this move was due to declining "World of Warcraft" subscribers.
As Blizzard has denied that any of its World of Warcraft development team members are in the list of 600 sacked employees, we believe the cuts could come from WoW's operational division. This, in turn, suggests that since World of Warcraft's popularity has peaked, it is considering a reduction in the scale of WoW's operations. Another aspect worth considering in this scenario is the company's attempt to change its strategy of relying too heavily on a single game. A heavy focus on WoW has reaped big gains for Activision Blizzard in the past, but the recent decline in WoW subs has also taken a toll on Activision's stock value, despite formidable success of "Call of Duty: Modern Warfare 3." This trend is also visible through Blizzard's enhanced focus on "Diablo 3," without giving much attention to WoW's declining subs. Additionally, with its latest feature of auction house, the business model of Diablo 3 is based primarily on micro-transactions. While there was initial speculation in the gaming circles that Diablo 3 may also go World of Warcraft's way by adopting a subscription based business model, the eventual adoption of a micro-transaction model suggests that Blizzard's strong faith in relying on a subscription model has been shaken. Click here to find out how a company's products impact its stock price at Trefis. Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.