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Mad Catz laying off 37 percent of staff in restructuring after Rock Band 4 disappoints

Rock Band 4 sales were strong, but missed expectations

Samit Sarkar (he/him) is Polygon’s deputy managing editor. He has more than 15 years of experience covering video games, movies, television, and technology.

Rock Band 4 co-publisher Mad Catz is undertaking a corporate restructuring that will result in layoffs of about 37 percent of its entire workforce, the company announced today in its earnings report for the third quarter of its 2016 fiscal year.

During the third quarter, which ran from October through December 2015, Mad Catz recorded $65 million in net sales, the second-highest in its history. That included "strong Rock Band 4 sales," said new CEO Karen McGinnis, although they were "lower than originally forecast." And Mad Catz's net loss for the first nine months of its fiscal year ballooned from $809,000 a year ago to $4.36 million.

The lower-than-expected sales of Rock Band 4 left more inventory on shelves, which led retailers to offer discounts; that resulted in lower margins for Mad Catz. During an investor call this afternoon, chief financial officer David McKeon said that Rock Band 4 performed well in October and November, but added that sales "slowed particularly after Thanksgiving." Mad Catz co-published the game, and also produced its new PlayStation 4 and Xbox One instrument controllers.

The changes at the executive level that Mad Catz announced yesterday — including the resignation of the company's CEO and the chairman of its board — are part of the reorganization, which the company said is "focused on lowering operating costs, increasing efficiencies and better aligning its workforce with the needs of the business." Mad Catz plans to take a hit of about $3 million for the restructuring, and expects the process to be completed during the fourth quarter of fiscal 2016.

Mad Catz anticipates that the reorganization will save the company more than $5 million a year starting in the first quarter of fiscal 2017, which begins April 1, 2016.

Looking ahead, Mad Catz is hoping that Rock Band 4 will continue to sell as Harmonix keeps adding new songs on a weekly basis and makes feature updates to the game. The company is also preparing for this month's launch of Street Fighter 5 with a new range of officially licensed fight sticks and fight pads.

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