State of the Industry
Layoffs, reasons, and hints of the future
Since the beginning of 2023, the game industry has seen the layoffs of over twenty thousand developers worldwide. Earlier this year, I was one of them.
This isn’t my first time being a casualty of studio layoffs. It’s not even my first time being laid off by a Sony studio. And thanks to years more experience, connections, and the difference in labor laws here versus back in Seattle last time, I’m in a much more secure place today than the last time.
So why am I still so worried?
Because the state of the game industry today, my friends, is real bad.
How bad is it?
The last year and change have been a steady stream of body blows for game developers. Every week seems to bring news of another game studio closing down, or another wave of layoffs from major publishers and their studios. There was another studio closure even while I was writing this article.
Indie studios are struggling to find any source of funding. Developers who have been lucky enough to stay employed so far are all working with the Layoff of Damocles hanging over their heads. And even historically stable studios and publishers like Ubisoft are putting a freeze on most hiring — all while there are record numbers of developers who are desperately looking for a new job.
These are always presented as being “strictly business” — never a judgment of bad behavior by employees or bad business by the studios, but strictly “no fault” layoffs from on high. And when management calls something “no fault”, that’s usually a pretty clear sign that the fault lies with management.
Because there’s no shortage of excellent games still being made and sold in the industry. We’re definitely not looking at an industry-wise game crash like back in 1983 with Atari and ET. In fact, for a lot of big publishers, the industry is better than ever.
First-party publishers like Microsoft are bragging about record profits in the wake of acquiring gigantic publisher Activision/Blizzard, even as they shutter game multiple game studios like Tango Gameworks, who made the critically-acclaimed sleeper hit, Hi-FI Rush. Then they’re turning around and saying that what they need is more small, critically acclaimed games... like Hi-Fi Rush. It’s the kind of untrustworthy behavior that makes it clear they’re either lying about their ultimate goals (likely) or so bureaucratically mismanaged that their right hand PR team doesn’t know why the left hand is laying people off (also likely).
So why are we seeing all these layoffs now?
How did we get here?
Like most big events, there are a lot of individual waves that combined to make this particular tsunami. Here are a few of the obvious trends that play into our current problems:
Post-Covid Correction — During the Pandemic years, the game industry was riding high as everyone was stuck indoors and playing games. While other industries floundered, game companies boomed, hiring more and more workers (usually remote) to take advantage of their newly captive audience. Obviously, that situation couldn’t last forever, and we’re seeing companies cut back now that players can go outside again.
Higher Interest Rates means Lower Investment — With the rise of interest rates, we’re seeing less investment capital being thrown around. There’s simply fewer sources of money for investment in risky ventures like entertainment and gaming, and we’re seeing similar pains across everything in the tech sector. Even studios staffed by veteran developers are struggling to find investment to keep the lights on. In the words of a statement from indie studio Eggnut as they closed, “The world is on fire. The game industry is fucked. Call your mom."
AI Anticipation — While the inflated promises of generative AI strikes me largely as just another cycle of tech hype that will ultimately end up like NFTs and Cloud Computing, there’s no denying that AI mania has caught on with a lot of people in the upper echelons of game development. Many managers are excited about the potential of cutting down on one of the most expensive parts of gamedev — namely, the people who actually create the art, record the voices, write the stories, and otherwise make the game. Attempts by some companies to jump the gun and realize these savings may be shortsighted, but the layoffs are very real for now. If and when the promised results fail to materialize, we’ll see how many of those devs are still around to be rehired.
Publisher Consolidation — We’re seeing more and more of the giant publishers buying up all the small studios and even the medium publishers. Microsoft’s acquisition of Activision/Blizzard is just the biggest example, which has been followed with massive layoffs in the inevitable restructuring. We’ve also seen Embracer Group’s buying spree of indie studios across Scandinavia, only for them to fail to land a multibillion-dollar deal with the Savvy Games group, leading them to collapse and savagely close and restructure all of the studios they had collected. In all these cases, the more the industry consolidates, the more it hurts the developers on the ground.
Are those the only reasons?
The fact that you could point to any of these trends as a partial explanation does a good job at distracting from the other major explanation that big publishers don’t want people thinking about:
Appeasing the Shareholders — Any company with shareholders who wants to stay on the right side of the market needs to show constant growth; not just profits, but the promise of ever-growing profits, regardless of circumstance. And to achieve that, sometimes human sacrifices must be made — trimming studio headcounts to make the parent company look lean and mean, cutting loose studios that made anything less than a hugely profitable breakaway hit, closing studios while keeping their IP for future licensing, and so forth. All of these serve to make a company’s budget look better and its shareholders happier. And there’s no better time to get away with these sacrifices than when there are other plausible reasons to be cutting costs everywhere else.
After all, when publishers’ stated reasons are at odds with their actual actions, it raises the question of what their actual goals are. As always with a mystery, it’s worth taking a look at what they stand to gain from their actions. And Microsoft’s stocks and valuation have only grown since their various rounds of layoffs.
As one ex-Blizzard developer put it succinctly in his last Slack message before his own layoffs:
Where do we go from here?
As I said, I don’t see this as an existential threat to the game industry. There will still be money to made making games, so it’ll still continue.
But it absolutely is an existential threat to many of the developers in the industry now.
The average time to find a new job in the industry is about one year from the start of one’s search; this is one reason so many developers are constantly looking for the next job, even when things seem stable.
Now, with the market flooded with people looking for work and fewer openings than ever before, the unforgiving math of the market means that a lot of developers are going to face extended unemployment. How many of us will be able to hold out until the industry recovers? How many of us will even want to throw more years of our work into an industry that can do this to us time and again without warning?
Now, I take some comfort in the idea that, if the industry turns around within the next year, we might see a new flourishing of smaller studios formed by those who have been laid off. Maybe interest rates will improve and funding will be easier to find — or maybe big publishers will take that IP they’ve collected and license it out to new studios to make sequels on the cheap.
But that’s only if developers are still able to stomach working in the industry when it’s all over. I already know many colleagues who are taking their latest layoff as an excuse to pursue other interests — hopefully ones that are more stable.
Studies have revealed a nightmare bouquet of negative short- and long-term effects of layoffs on those affected. These range from the obvious immediate issues of stress and financial hardship, to damaged relationships and marriages, to significantly lower lifetime earnings, to lasting damage to mental health. At the most extreme end, it’s estimated that a single layoff lowers a worker’s life expectancy by up to 1.5 years.
I can’t blame any other developer who looks at those numbers and decides they’d rather spend their future in just about any other industry. We may have rough measurements of the damage done to developers, but the braindrain this will cost the industry simply cannot be measured.
But it’s not all doom and gloom in the industry. We’re seeing more and more attempts by developers to organize unions and other worker protections, from individual studio agreements like my ex-colleagues at ZeniMax Workers United, to efforts to form an industry-wide union. While unions wouldn’t be able to fight every issue causing problems above, it’d give developers tools to fight against the abuse of AI, restructuring from consolidation, and the trend of layoffs to boost stock prices.
And after these last years of pain, it’s becoming clear to everyone in the industry that they need to work together if we want to be secure in our industry. Unionization is one step we can take together.
And for me?
Personally, this has been my fourth layoff in 18 years of working in games. As I said, it’s not the worst one I’ve been through, and I have high hopes of finding another job soon. But it’s definitely getting to me.
It’s one thing to willingly devote decades of my life to this craft I love, but it’s another to think that I’ve lost 6 years of life expectancy to layoffs caused by corporate malfeasance. Some days, that loss feels more palpable than others.
It’s one of the reasons I’ve decided to spend my newfound free time writing about the process of making games here. At very least, I can provide some understanding to gamers outside the industry, and maybe some advice and warning to those entering the industry now. Goodness willing, I can even help my fellow developers rally around these issues and work to address the problems in the industry.
After all, when you’re surrounded by bullshit, you might as well get to planting flowers.
I'm sad to say I've joined you in the layoff zone. This was a great summary about what's going on though!