The Crisis of Layoffs in the Video Game Industry: A Closer Look at the Unprecedented Instability
The video game industry has always been characterized by its lack of job security. With the cyclical nature of game development, layoffs have become a common occurrence. However, in recent years, the industry has been facing an unprecedented crisis of instability.
The cracks began to show in 2022, following a boom in the industry during the COVID-19 pandemic. With people forced to stay at home due to lockdown restrictions, video games saw a surge in popularity. However, this period of growth was short-lived. In 2022, approximately 8,500 video game industry workers were laid off, a number that increased to 10,500 in 2023. The layoffs in 2024 are already surpassing these figures, with over 6,000 people losing their jobs in just the first 90 days of the year.
These layoffs have affected studios of all sizes, from small independent shops to massive gaming giants. Companies such as Microsoft, Unity, Riot Games, and Twitch have all made significant cuts to their workforce. The reasons behind these layoffs vary, with some attributing it to overexpansion during the pandemic or a response to an economic downturn. Others point to excessive spending or stalled video game revenue.
However, experts argue that these explanations only tell part of the story. According to Laine Nooney, an assistant professor at New York University, this crisis is the result of two interconnected factors. Firstly, the industry experienced unprecedented levels of engagement during the pandemic, leading to expansion and growth. However, executives failed to anticipate that this upswing would not be sustained.
The media attention surrounding the spike in hours streamed and money made during the pandemic created a collective delusion that this growth would continue indefinitely. Unfortunately, this growth did not hold, and video game investments hit major lows in 2023. Industry revenue has also declined, both in the U.S. and worldwide. The revenue generated can no longer compensate for the high staffing costs incurred during the expansion.
Additionally, the video game industry has undergone a broader shift in business models. Companies are increasingly relying on user-generated content to cut costs and drive engagement. This shift is exemplified by Epic Games, which laid off over 800 employees due to a change in its business model. Fortnite’s revenue primarily came from microtransactions, but as its popularity waned, the focus shifted to the “creator ecosystem.” This model allows users to create games and experiences within the platform, reducing the need for additional content from Epic Games. However, it also means that Epic Games has to pay creators to keep them engaged.
These shifts in business models have had varying impacts on different companies within the industry. Games like Minecraft, Roblox, and The Sims 4 have successfully implemented user-generated content to keep players engaged. However, overall player spending on video games has declined, despite increased spending on other forms of entertainment.
While all video game companies are facing challenges, the circumstances leading to layoffs are unique to each company. Unity, for example, generates revenue through licensing its game engine and ad-selling business. Despite bringing in $1.3 billion in 2022, Unity is not profitable. The company faced backlash when it attempted to increase prices for its game engine license in 2023.
Twitch, on the other hand, relies on viewer spending and ad sales. However, ad sales have plummeted, resulting in reduced revenue for the platform. Bloomberg reported that Twitch is also not profitable and is struggling to support its live video infrastructure.
So, what can be done to address this crisis of instability in the video game industry? Some developers are turning to unionization as a means of gaining a collective voice in the workplace and standing up to shareholder demands. Even major corporations like Microsoft have seen their employees unionize. Others are exploring alternative models, such as worker-owned co-ops, to challenge the traditional corporate structure.
Grassroots efforts have also emerged within the industry to support those affected by layoffs. Initiatives like Amir Satvat’s job openings list on LinkedIn and the Job Seeker’s Workbook provide resources and networking opportunities for job seekers.
While layoffs have been a recurring issue in the video game industry, the current crisis of instability is unprecedented. It is crucial for companies to reevaluate their growth expectations and prioritize long-term stability over short-term gains. Only then can the industry create an environment that supports the people making video games and ensures a sustainable future for the industry as a whole.
