It feels like every day I see a post about some big game development studio laying off a large chunk of their workforce. What are the causes of this?
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A number of reasons.
1) During lockdown everyone was staying inside and playing video games. That pumped a lot of extra money into the games market so studios expanded.
2) There is a thing called the hype cycle. Studios use there growth to show that they are real companies worth investing in. Then by cutting back show that they are “responcible”. This is both bullshit.
This video explains it: https://youtu.be/-653Z1val8s?si=ciAh_KAsw8YfeJyc
TL;DW Everyone is playing a game and dancing a dance to attract and then keep funding. Lay offs are part of this dance. You overhire to attract an initial investment, and then do lay offs to keep it. Some companies are leading this dance, and some companies are copying the dance without really understanding why they’re doing it.
There’s two main reasons that are impacting not just the game dev industry but others as well.
The first reason is that there’s been a lot of corporate acquisitions lately like Microsoft buying Activision-Blizzard (AB). When that happens you get a lot of redundant positions that the parents company can absorb, which means there’s going to be layoffs in the future.
As an example, say there’s a department at AB in charge of hiring / Talent acquisition. Microsoft already has a department that does that, so most of those people (minus a few token employees who know the AB company culture) will be let go.
The second reason is tied around interest rates. That is an ELI5 in itself, but basically for most of the last decade it was super cheap to get money and use that for projects. Now, it’s significantly more expensive to get a loan for money, so companies are less willing to spend money and/or need to cut back because they were supported by cheap money.
So as an example, say you’re a small game dev in 2013. You can probably get a loan from a Venture Capital (VC) fund for almost zero interest, and there’s tons of VCs available to offer you money. Because of that, it’s easy to get money to fund your game studio. Fast forward to 2023, and now there are fewer VCs and they charge more interest for their loans. This means you either can’t fund your studio or you need to make cuts to survive on the money you generate on your own.
the whole IT sector boomed when covid hit so all the tech companies scrambled to hire whoever they could and now that things are back to normal they need to cut back down.
on top of that the massively inflated prices in California and the proliferation of work-from-home acceptance also might cause them to seek new employees in places where they have to pay them less
Financial year is nearly up. They need to make it look like they are making a profit with lack of overheads.
Many responses here are citing the layoff cycle…..
Aka, you hire once you have the investment at the start and layoff at the end to look more secure for further investment.
Yes, this happens, but normally, this is a lot of temp workers, short-term contracts, and most employees would be hired knowing this is going to happen.
What is happening at the moment is kind of unprecedented since the birth of the modern gaming industry. We’re seeing thousands of game devs loing their jobs across the board. People, in some cases who have been with these companies for over a decade.
I know this is anecdotal, but here in the UK, I know four guys who work for big game companies, all being laid off or in departments suffering large-scale layoffs. In all cases, it’s been confirmed by the higher-ups that it’s rising costs and wages being behind this.
This is resulting in a lot of restructuring, where a lot of work is being outsourced to cheap third parties in Eastern Europe and South East Asia.
You also have a lot of multi-national large-scale purchases and mergers, which always results in restructuring layoffs.
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