Game Dev Too Risky. Developers Comment Mass Layoffs

Source: Company of Heroes 3 / Relic Entertainment.

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In 2024, the gaming industry could experience minor or major successes and tempt players with promising title announcements. Unfortunately, all these reports are overshadowed by massive layoffs that have been impacting nearly all developers for the past few months - from major publishers to small independent studios. Game developers spoke to IGN about the reasons behind mass "employment reductions" and project cancellations.

Pandemic (partly) to blame

Many developers, publishers, journalists, and analysts have been writing about the origins of the crisis (as it's hard to doubt it with over 10,000 layoffs throughout 2023 and half of that in January 2024 alone). The coronavirus pandemic and the widespread hiring of devs during this time were most commonly mentioned, followed by a period in which players "left their homes" and game revenues fell to pre-2020 levels. Such a genesis was given by, among others, Strauss Zelnick, CEO of Take-Two Interactive, in November of last year, and it was supported by many.

However, it's clearly only half of the truth. To uncover other important reasons for the wave of layoffs, Rebekah Valentine from IGN interviewed more than forty developers who had experienced this in their companies. The devs shared with her the causes of the crisis as provided to them by their superiors, as well as their own reflections on why the official explanations may not align with reality.

Many of the journalist's interviewees believe that the pandemic wasn't the cause, but simply one of the catalysts that intensified the problems affecting the gaming industry prior to its outbreak. Valentine points out, among others: to Riot Games' announcement about January layoffs. It mentions "big bets" that the developers of League of Legends have been making, starting from 2019, before the coronavirus pandemic.

Survival instinct leads to excessive growth

Of course, as mentioned, the pandemic outbreak has heightened the tendencies that are at the root of the current layoffs. Some of this can be simplified into one general trend we've already mentioned: studios and publishers have gone overboard with hiring, acquisitions, and projects that are now mostly paid for by ordinary employees.

However, at least some of these actions weren't driven by "greed" and mindless desire for expansion. One of Valentine's interlocutors characterizes the motivation of certain "major tech companies" as stemming from a "misguided self-preserving instinct." These companies anticipated a crisis, but concluded that they needed to follow in the footsteps of their competitors and become sufficiently "big" to increase their chances of surviving the inevitable market crash in the gaming industry.

However, according to information from developers interviewed by IGN, many companies didn't rely on a "solid" strategy for their spending, instead opting for risky ventures and technologies (such as blockchains).

1. Epic Games and its investments in acquisitions or the metaverse favored by Tim Sweeney were meant to be the example. Hence the later search for savings, also to avoid layoffs. The company gained millions of dollars this way, but neither this nor reducing or delaying bonuses and promotions was enough - 800 people left EG in September.
2. Nevertheless, as former and current employees have noted, Epic Games made an effort to avoid layoffs and cost cuts. Other companies struggle more with this problem, parting ways with employees sooner than with expenses such as "luxury dining rooms or expensive offices used by a few people."
3. Savings also affected the game production itself. Outsourcing tasks to external teams is increasingly common and is evident in many "staff reductions" in quality assurance departments. One ex-employee of Bungie mentioned being instructed by the studio to "automate" his work, meaning to develop tools that would allow others to perform it without his involvement.

Games too risky

These savings are a result of the increasing cost of game production and the risk involved in developing them, which also puts pressure on small teams as investors tighten their belts. One of the developers who spoke to IGN stated that although the financial problems of Embracer Group and the forced closure of studios are undoubtedly the company's fault, small studios had no one to turn to for help after losing Embracer's support. Simply, publishers aren't interested in such investments.

This might be considered as further proof of how profit-focused corporations and business tycoons are detrimental to the "creative" development of video games. However, problems don't always stem from the "greed" of CEOs or other people in higher positions. Sometimes, the game just doesn't sell as well as the developers had hoped, and things become more complicated during production process.

Relic Entertainment was given as an example. The studio hasn't had a big hit in years, and the new installment of the Company of Heroes series took longer to develop than anticipated. So when third part was released to mixed, but not optimistic reviews, it became clear that layoffs were inevitable.

It can be argued that this is the result of "disappointing" fans, but this is only part of the truth. Competition in the market is fierce, and even titles that are otherwise successful may not reach enough players to cover production costs, let alone sustain the studio without the need for "reductions."

Layoffs kill creativity

The successful release of a game has been a topic of discussion for many years, whether in the news or in various articles. Ensuring the success of a game is challenging when its assessment relies on abstract values such as playability and the aesthetics of the audiovisual layer. Even the most experienced studios are compelled to resort to trial and error, resulting in delays and mounting pressure from publishers, investors, and so on.

Let's also consider the mentioned factors: increasing production costs and huge competition. This, in turn, leads to the failure of even promising (or very good) titles, which discourages investors, without whose support further games won't be created. This demoralizes devs and effectively extinguishes their passion and creativity, as pointed out by one of the IGN interlocutors.

The failure of Immortals of Aveum is another proof for publishers that it's not worth risking huge amounts of money to develop something completely new. Electronic Arts was expected to invest $85 million in production alone, but it's uncertain whether the title surpassed the sales of Battlefield 2042, which cannot be deemed a success even after two years.

Do these examples partially clarify why the gaming industry, supposedly the top player in the entertainment sector, is going through a significant layoff crisis? Even if that's the case, it's no consolation for the thousands of developers who have lost their jobs in the past few months. And also those who wonder if they will be next in the upcoming wave of "employment reductions."