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?
In: Other
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.
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