In recent years, the gaming industry has been plagued by mass layoffs, leaving thousands of developers wondering what went wrong. As we explore the reasons behind this trend, it's clear that COVID-19 is only part of the story. The pandemic may have accelerated a problem that was already brewing – one that's deeply rooted in the way game executives choose to spend their money.
At Ascendant Studios, developer Aaron (name changed for anonymity) celebrated the launch of Immortals of Aveum with his colleagues. But just weeks later, almost half of the studio, including Aaron, were laid off due to the game's underperformance. This was not an isolated incident – numerous studios have faced similar layoffs in the last year and a half.
As the gaming industry grapples with these mass layoffs, many point to the pandemic as the culprit. Take-Two CEO Strauss Zelnick noted that during the pandemic, "people got a little fat and happy," leading to overspending and overhiring. While this explanation holds some truth, it's not the entire story.
Riot Games' public statement revealed that their layoffs were actually planned long before the pandemic began. They had made big bets on new experiences and broadened their portfolio, growing quickly but without a clear focus. This lack of direction led to unsustainable costs, leaving them with no room for experimentation or failure.
In reality, many game developers have been paying the price for poor executive decision-making. I spoke to over 40 developers whose companies had faced layoffs in the last year, and their stories paint a picture of an increasingly volatile environment fraught with high costs, growing risks, and increasing volatility.
Some studios ballooned in size or number of projects during the pandemic, only to struggle when revenue leveled off. Others went on acquisition sprees, expanding to enormous, unsustainable sizes. When the surge of pandemic revenue ended, companies were left struggling to maintain their massive operations, leading to widespread layoffs.
The trend towards AI-powered mobile apps is also playing a significant role in these mass layoffs. As games become more complex and require significant resources to develop, studios are facing increased pressure to adapt to this new landscape.
In the midst of these changes, it's clear that something needs to shift. The gaming industry must find a way to balance its creative ambitions with financial reality. For now, game developers continue to pay the price for poor executive decision-making – and it's time for change.