Rock Band 4
Members of the Rock Band 4 development team at Harmonix rock out at E3 2015. Harmonix Music Systems

Rock Band Publisher Cuts Staff By 37%

Feb 10, 2016

Was getting the Rock Band back together a wise move for peripheral maker Mad Catz? The company insists so, but it's an argument that's hard to swallow.

The company on Tuesday announced a restructuring that will result in it laying off 37% of its workforce. This follows Monday's abrupt exodus of the company's chairman, president/CEO, and SVP of business affairs.

Mad Catz (mcz) executives remained bullish about the game, though, saying the launch of Rock Band 4 was strong and resulted in the second highest third-quarter sales in the company's history.

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"The successful launch of Rock Band 4 this holiday season was a considerable achievement for Mad Catz and it demonstrates the capability of our distribution platform," said Karen McGinnis, the company's new president and CEO, on a call with analysts.

That sounded good—for a few seconds. That's when McGinnis acknowledged that sales of the game were actually lower than forecast. (The game had a strong October and early November, CFO David McKeon added, but stalled after Black Friday.)

Then she acknowledged the company was forced to offer deeper discounts than it had hoped as retailers had excess inventory on hand. That, in turn, hurt the company's margins. Also, European sales of the game were especially weak.

Despite that, Mad Catz (which, before Rock Band 4, was exclusively a peripheral manufacturer) says it's counting on the game's long tail to help turn things around for the company.

For more, read: 'Rock Band VR' Key to Growth of Virtual Reality Market

McGinnis says the company plans "to position Rock Band 4 as the platform production for this generation of consoles—adding new features and new gameplay over time. We’re intent on playing the long game...and making this exciting product a long term sales opportunity."

The layoffs, which officials say will save the company $5 million per year, aren't being tied directly to the fate of the game, but instead come because Mad Catz failed to grow as it had hoped to.

"Over the past few years we have really built the company that was really designed to be able to scale to a much larger revenue base than we have today," said McGinnis. "As we...look at where we're headed going forward, we just wanted to take some of the complication [and redundancies] out of the business...so that we can move forward with the lower cost structure without jeopardizing actually the strategy or our ability to execute going forward."

Investors aren't convinced. Mad Catz (mcz) shares have fallen 50% over the past two days.

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