LogInSpecialists offer their opinions on what it means for the field.
Image credit: Activision Blizzard | Hearthstone
One of the biggest plagues of this year is layoffs in the game industry: it's hard to find a big company that hasn't cut its ranks yet. Activision Blizzard, Epic Games, Microsoft, Amazon, and many other major players had to let go of their employees to fit in this difficult year. Embracer Group even closed several studios entirely and is not planning to stop.
Such massive changes are bound to affect the industry, and GamesIndustry.biz reached out to analysts, recruiters, and investors to find out what had happened and what we should expect.
"In gaming, the significance of 'efficiency' has risen dramatically over the last 18 months," Kantan Games CEO Serkan Toto said. "There is a much higher sense of urgency now to save costs and run slimmer organisations. The pressure is on for game industry CEOs to pull out the hammer and handle the biggest cost block of them all, namely staff. And this is what we have seen in 2023."
Toto also believes that often CEOs think up to 20% of their workers are redundant at any point in time.
Hiro Capital partner Spike Laurie connects the layoffs to Elon Musk cutting 50% of Twitter's workforce in November 2022. "He had figured out from people's electronic passes that there were more people serving food in the cafeteria than actually there to eat it."
From this, other CEOs started looking at their companies' sizes and cutting them. "Why? We have come to the end of an economic cycle, fuelled by an addiction to cheap and readily available cash."
These global layoffs, however, seem glaringly disproportioned to IDG Consulting's SVP of consulting Emilie Avera, who notes that "there's an evident lack of comparable reduction in total compensation packages for executives", which doesn't work well with companies' desire to reduce expenses.
Avera, along with other specialists, thinks the COVID lockdowns affected the market as well. At the time, gaming saw its peak, making many invest in the industry and buy studios. Now when everyone went back to work and started spending much less time playing games, profits dropped and made leaders rethink their strategies.
"Funds were pouring money into untested blockchain and metaverse studios, driving up wages but often not providing the studios enough runway to launch a game," offered Laurie.
But how will layoffs affect the industry in the future? Midia Research co-founder and senior analyst Karol Severin believes it is "about to see similar pressures as the music and video industries saw when streaming subscriptions truly took off. There will, of course, be many differences in how these dynamics will play out, but the fact that the value of an individual game in consumers' eyes will decline is inevitable. As such there will be a need for fewer games, therefore fewer developers and publishers."
Avera's point of view is that generative AI could be used to assist (but not replace) development teams and reduce development time, and more companies will turn to outsourcers for services such as art, engineering, and audio.
While Toto is sure layoffs will be present throughout 2024, Laurie says that now is the time for talented individuals to use the tools available to them "to build fun and engaging experiences for people to enjoy."
"If this round of layoffs in the industry is the catalyst people need to build new games in a leaner, more efficient and creative way, we are all richer for it."
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