What The Recent Wave Of Layoffs Might Mean For The Gaming Industry

The year 2023 has witnessed some remarkable highs in the gaming world. Baldur’s Gate 3, for instance, hit the scene and earned resounding praise, cementing its place as one of the top-rated video games on Metacritic. But the only game to give Baldur’s Gate 3 a run for its money in terms of critical acclaim is The Legend of Zelda: Tears of the Kingdom.

In addition to these standout titles, 2023 has graced us with a slew of other fantastic games, including Spiderman 2, Assassin’s Creed Mirage, Armored Core 6, Dead Space Remake, Starfield, Final Fantasy XVI, Hi-Fi Rush, Star Wars Jedi: Survivor, and Hogwarts Legacy. Typically, such releases would define a gaming year. However, 2023 might be remembered not for its stellar game lineup but as the year of extensive layoffs in the game industry.

Similar to many other sectors, game developers have been downsizing their workforce due to economic uncertainties throughout 2023, a trend that’s showing no signs of stopping anytime soon. According to Farhan Noor’s website, videogamelayoffs.com, game developers have issued pink slips to over 6,000 employees in 2023 so far.

Regrettably, the actual number is likely much higher. For example, Microsoft alone let go of approximately 10,000 employees from its gaming division at the beginning of the year, and numerous other companies have chosen not to disclose the precise extent of their job cuts. With all these uncertainties in the air, just what can we expect from the industry?

No Studio Is Safe

The gaming industry’s faced over 100 waves of layoffs this year, starting with Microsoft’s announcement of cutting 28,000 jobs back in January, which included 10,000 from their gaming division, impacting major players like 343 Industries and Bethesda Zenimax. Rumors even suggested 343 might stop working on the Halo series to shift to a more supervisory position, though they quickly denied those claims.

The trend continued throughout the year, with EA letting go of 800 employees in March, Relic Entertainment bidding farewell to 121 developers in May, and recent layoffs at Telltale Games. Embracer Group, one of, if not the biggest videogame companies, with 129 studios under them, has also fallen victim to this trend. Sadly, some studios didn’t survive, the biggest example being Volition, which used to be under Embracer Group. A particularly painful loss for us Saints Row fans, as it eliminated all hopes of a revival.

A letter to our community. pic.twitter.com/vtFM7szLbN

— Volition (@DSVolition) September 1, 2023

If That wasn’t enough, Epic Games then shocked the industry by laying off 16% of their workforce, despite their immense success thanks to Fortnite and Unreal Engine, which CEO Tim Sweeney blamed on excessive spending. I mean, if even Epic, with its money-printing machines, wasn’t immune to mass layoffs, who could truly feel secure now?

While these layoffs vary in scope and impact, they share a common theme as the driving force behind these difficult decisions: cost-cutting and downsizing. If we trust the latest information that’s been provided, it strongly suggests one clear idea: the video game industry, in its current state, has grown far too large to be able to sustain itself.

The Signs Have Always Been There

We’ve seen reports of video game sales declining across the US and Europe as far back as January of this year, with Ubisoft issuing a profit warning and canceling some of their upcoming projects. There have also been layoffs in the studios’ media departments as well, including massive companies such as Xbox, Unity, and even Riot Games.

Of course, sales declines are never a good thing in business, particularly coupled with rising costs due to inflation and the looming threat of a global recession. In the US, spending on games fell 5% in 2022 while across Europe, game sales went down over 7%. Now, this data looks pretty bad, but there was one very big reason for the decline: COVID-19.

Video game sales boomed over the Covid lockdowns so it makes sense that when things are opening up more and more the sales will naturally go down.

— Genki✨ (@Genki_JPN) August 3, 2022

Back in 2020, when the lockdowns hit, video game sales surged. The titles that drove the market were actually older games, with the exception of some new games such as Animal Crossing and The Last of Us: Part 2, but it was the previous year’s titles that saw the biggest increases, destroying the idea that the gaming industry was recession-proof.

Back when subscription services like Netflix didn’t exist, videogames were indeed good value purchases. Nowadays, though, with the existence of consoles that cost over $400 and games that are reaching the $100 mark, people are purchasing fewer games, prioritizing those that offer longer stories and playability, which was why titles like Baldur’s Gate and The Legend of Zelda: Tears of the Kingdom saw so much success this year.

Why are games so expensive nowdays?
byu/PythonEntusiast ingaming

What Does This Mean For The Future Of Gaming?

According to the data we have right now, one thing is abundantly clear: consumers are buying fewer games and spending more time with select franchises, a trend likely to accelerate as the market continues to shift toward live service titles. Even single-player titles are demanding more of players’ time, with Avera noting that some of the biggest recent hits, including Baldur’s Gate 3 and Zelda: Tears of the Kingdom, take 50 or more hours simply to get through the main story.

The gaming industry 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 now thanks to the vast market of subscription services, but the fact that the value of an individual game in the consumer’s eyes will decline is an inevitable truth.

Lengthy games, combined with a labor/talent shortage among developers, engineers, and designers, place immense pressure on an industry striving to capture as much mindshare as possible from a discerning gaming audience,” Emilie Avera, IDG Consulting.

As such it’s very likely that there will be a need for fewer games, and therefore fewer developers and publishers. I won’t be surprised if game studios started to shift to releasing a single, super long game once every few years, focusing only on titles that they know will make them money. That means that popular, yet less profitable titles might never see the light of day.

This isn’t just a theory either, it’s already evident with how Respawn shelved Titanfall 3 in favor of focusing solely on Apex Legends because it made them more, and continuous money even though many fans are willing, and able, to buy a new Titanfall game. But, as evident, Respawn won’t do it because that’s a one-time-only purchase.

Titanfall 3 was in development for 10 months before it was cancelled and turned into Apex Legends
byu/Finn_Flame ingaming

Is There A Long-Term Solution?

When we look ahead at the gaming industry’s potential actions, experts have put forth several ideas worth considering. To begin with, there’s the notion that generative AI could step in as a valuable aid to, not a replacement for, overburdened development teams. The aim? To trim down the total time needed for game creation. It’s a concept with promise.

I doubt anything like that’s going to happen though, since many employees, especially those who are part of the SAG strikes, will make sure they don’t. This is because there’s a fear that even a small inclusion of AI could snowball into it becoming a more significant part of the industry in the long run, something that the Actor’s Guild and the Screenwriter’s Guild are already facing.

Another avenue under consideration is the inclusion of user-generated content as a means to cut down development costs, essentially using the players themselves as a sort of glorified unpaid interns to work on projects. But, as we’ve seen with the controversy surrounding games like Roblox and its revenue-sharing models, there are pitfalls in this approach.

Still, I find myself aligning with a part of this perspective, especially based on my experiences playing games like Skyrim, Pokémon, Minecraft, and Team Fortress 2. It’s often clear that modders and fan-game developers often excel at enhancing their beloved titles, often outshining the original studios. If there’s a way to make them a part of the development process with added benefits, then I’m sure things might work out.

What Can Be Done To Fix This Now?

There’s no magical solution to sweep away all the problems plaguing the gaming industry. The truth is, that many of these issues are beyond the industry’s control, with factors like inflation and interest rates playing a significant role. What’s more, it doesn’t seem like these job cuts are going to let up anytime soon. I won’t be surprised if we continue to hear discouraging news well into 2024 either.

As newer studios continue their growth, they need to learn how to spend their money wisely. Overspending could jeopardize their survival, so it’s wise to hire only for essential roles. Realistically, I don’t expect much change until the new year, once the industry has assessed how well its Christmas releases have performed. Santa better be working overtime, because the fate of the industry literally depends on it.

This year, #SOTI2024 topics include: generative AI, industry layoffs, social media, game engines, unionization, and more. It's poised to be one of our most illuminating surveys yet, reflecting all the changes and challenges in the game industry (cont.)

— GDC 2024 (@Official_GDC) October 11, 2023

Despite the challenges on the horizon, there’s still room for optimism though. The gaming industry is expanding, with Gen Z playing a pretty major role, and tech giants like Meta and Apple embracing gaming technologies, with the latter even producing phones that can run Triple-A games without problem. This growth offers a glimmer of hope at least.

Now is the perfect time for talented individuals to use the incredible array of tools at their disposal to craft enjoyable and captivating experiences for gamers. If this round of industry layoffs serves as the catalyst that inspires people to create new games in a more streamlined, efficient, and imaginative manner, then we all stand to gain from it.