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Tech

The big games of 2023 have been overshadowed by a dark cloud of layoffs

Layoffs are a sad reality in any industry, but the scale and scale of gaming industry layoffs in 2023 go well beyond a typical year. More than any video game or specific news story, layoffs have marked the last 12 months. Businesses large and small have felt their impact. Unofficial figures estimate that 9,000 workers have been affected, and at the heart of it all are businesses that value growth at all costs, including people.

In September, Epic Games laid off 830 employees. In a statement, CEO Tim Sweeney wrote: “We spend far more money than we make. (…) I believed for a long time that we could succeed in this transition without layoffs, but in retrospect, I realize that it was unrealistic. Some of that spending was on companies like SuperAwesome and Bandcamp that Epic purchased in 2021 and 2022, respectively. Both companies were sold shortly after Epic announced layoffs.

Epic creations Fortnite, a multibillion-dollar revenue generator; it licenses the Unreal Engine software that many developers use to create games, including Final Fantasy VII Remake, Lies of PAnd Star Wars Jedi: Survivor; and it has its own (unprofitable) games storefront. And Epic still spent so much money that, to maintain an acceptable level of profitability for investors, it had to let 830 people go.

Over the past two years, Embracer Group has made headlines for its numerous purchases of game studios, media companies and the intellectual property rights of The Lord of the Rings. This year, the company immediately turned around and launched a massive restructuring program due to the collapse of a $2 billion investment deal. Axios reported that the deal was made with Savvy Games Group, the gaming arm of the Saudi government’s Public Investment Fund. Following the failure of this investment strategy, Embracer closed three studios, is seeking to sell others, canceled numerous projects and laid off more than 900 employees.

These are just the biggest and most egregious examples. Hasbro laid off 1,000 employees, including most of the team that worked on Baldur’s Gate 3 with Larian Studios. EA laid off 6 percent of its workforce, or about 780 people. BioWare, Microsoft, Bungie, Naughty Dog, Ubisoft, Amazon, CD Projekt Red, Sega, Unity and Activision Blizzard have all been affected, to name a few. And in the face of these devastating layoffs, the consequences of which we have yet to see, one of the industry’s biggest and most watched events hasn’t even taken this reality into account.

It doesn’t have to be like that. In 2013, Nintendo executives took a pay cut after poor Wii U sales to avoid laying off developers. “If we reduce the number of employees to achieve better financial results in the short term, employee morale will decrease,” Satoru Iwata, then president of Nintendo, said during a question-and-answer session with investors. “I sincerely doubt that employees who fear being fired are capable of developing software that will impress people around the world.” It wasn’t the only time either. Two years prior, in 2011, Iwata and Nintendo’s board of directors cut salaries after weak sales of the 3DS prompted Nintendo to reduce the price of the handheld.

Nintendo, developer of some of the highest quality video games ever created, says that in the long run, it is much more important to prioritize people over profit, because those people will have a better incentive to create good games. From September, Tears of the Kingdom sold 19 million copies, more than half of what Breath of the Wild has done so in the six years since its launch. This success – one that made game developers, journalists, and gamers lose their minds over the game’s bridge physics – was due in part to the fact that the development teams between the two games remained largely the same. Retention is how institutional knowledge is preserved and transmitted. This is the best way for developers to get promoted, allowing new people to enter the industry.

Unionization can also protect developers in the event of layoffs. Efforts to unionize studios have continued in 2023, with some developers at Sega, CD Projekt Red, Avalanche Studios, and ZeniMax all voting to form unions this year.

None of this is to say that layoffs should never happen. But the magnitude we saw in 2023 is certainly not expected to be the same. We don’t know what steps, if any, the executives of these companies, with millions of dollars in compensation, took to avoid or reduce the need for layoffs. Mitigation measures such as salary cuts and cancellation of bonuses should be prioritized before people are laid off.

The refrain of 2023 in gaming has been “a great year for games, terrible for game developers.” I would say that we should just remove the first part of this statement completely. A terrible year for game developers can’t be good for games.

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