Big cuts come to video games: nearly 9,000 workers were laid off in 2023

The video game sector said goodbye to a bittersweet 2023. On the one hand, big releases and buoyant figures in the sales of titles and consoles consolidated the good pace of an industry that grows close to 9% annually and that prints more bills than the digital and the streaming. On the other hand, the bitter side: nearly 9,000 industry workers were laid off. Which marks a record for cuts in a single year. The adjustment is carried out by well-known faces from the trading floor gaming: Epic Games, creator of Fortnite, Unity, a leading developer of platform tools; Niantic, owner of Pokemon Go, and Embracer Group, the European colossus that embraces hundreds of smaller studios, among others. Although the list is extensive: more than 80 studios reduced their workforce in 2023, according to the web portal videogamelayoffswhich tracks layoffs in the industry.

The labor earthquake arrived at the beginning of the year. The American firm Unity, responsible for titles such as the mobile games Hearthstone and Temple Run, laid off almost 900 workers in the first part of the year and another 265 workers in November, leaving the company with a workforce of 7,000 people. US-based Epic Games, which owns Unreal (the preferred engine for developing 3D experiences), followed closely with 830 layoffs in September. And in the summer, Niantic, a pioneer in augmented reality games, laid off 230 employees, about 25% of its workforce.

Embracer Group, which maintains 129 studios under its command, also reduced its workforce by 5% in November, equivalent to nearly 900 employees. Amazon's video game business, in turn, shed 400 workers. The changes included the closure of its Twitch channel dedicated to industry programming, as well as its Game Growth product, created to boost content from the streamers. Other historical developers, such as Sega—the Japanese multinational creator of Sonic and which recently took over the mobile game angry Birds— dispensed with 121.

Although January is far from the resting point for cuts. Twitch announced a new round of layoffs affecting 500 employees — almost 35% of the company's workforce. And Discord, the leading communication platform between players, announced this week that it would cut 17% of its staff (170 people).

The reasons are varied, but according to the same studies and the experts consulted, they are the consequences of a context of global slowdown added to the high growth expectations that were imposed during the pandemic. With millions of homes confined by the coronavirus crisis, studies believed that the gold mine represented by the increase in time at home would be inexhaustible. The phenomenon was not exclusive to the sector where the Pac-Man, the large training or music-on-demand platforms such as Netflix or Spotify also invested in producing exclusive content at a pace that they later understood was unsustainable. Under the same scheme, large technology companies, such as Microsoft, Meta or Apple, also reduced their workforce or slowed down the pace of hiring.

Omdia analysts break down that in 2020 and 2021 the video game industry had profits of $50 billion, which caused “growth expectations that the sector has not been able to sustain because the increase in production and personnel generated at the level “global expenses of 167 billion in 2023.” The consulting firm also points out that the lackluster pulse offered by promising initiatives such as NFTs and the metaverse are responsible for the decline.

Investment has also plummeted. In 2022, the industry received $14,492 million in private financing, according to the study by Konvoy, a consulting firm specialized in this industry. While throughout 2023 only 2,093 million were accumulated. Amir Satvat, director of business development at Tencent, the group that leads the sector in China, explains that currently a title has to be a success for the studio to recover its expenses. Furthermore, these no longer only compete with each other, but have opened new battle fronts against large entertainment platforms such as HBO or Amazon Prime. “The competition now is for screen time,” Satvat emphasizes.

The Chinese case

At the end of the year, the sector received news from China that the creator of TikTok, ByteDance would completely stop its foray into the video game branch — which it had landed with relative success to compete with Tencent. The decision implied closing or selling the Nuverse brand, focused on the development of mobile titles and which had been successful with deliveries such as Mobile Legends: Bang Bang. The announcement, which came on Nov. 27 from an anonymous company source, did not specify how many positions could be lost. Although, according to data from Late Post, the studio had about 3,000 employees in 2021.

An additional element of pressure is added to the industry in the Asian giant: the Government maintains an open campaign to combat addiction, especially among minors, who have limited hours they can play during the day.

To this we must add that producing a video game today is almost as expensive as making a movie, only that the execution of a console game can take up to twice as long. The fifth installment of the legendary saga of Grand Theft Auto, For example, it cost about $265 million—close to what it took to make the Trilogy trilogy. The Lord of the rings— and it took about five years to see the light of day. For this reason, Satvat adds, “we can expect that video game creators will choose safer bets such as known stories and universes and sequels to projects, which have a greater chance of success.”

This is an argument supported by Rita Fortuny, chief producer of Péndulo, one of the studios with the longest history in Spain. “It's something similar to what happened to the film industry a few years ago,” says Fortuny, who points out that making video games is no longer the golden egg machine. “Now advertisers and investors need more assurance that things are going to work economically and the way to ensure that the risk is greatly reduced is to work with brands that work. The role of developing very innovative mechanics has now been relegated to small teams, which can afford to take a little more risk,” she explains.

Spain stays afloat

Fortuny also clarifies that due to the moderate size of the studios in Spain, it is more difficult for layoffs to occur. According to the Spanish Video Game Association, the average team workforce in the country is around 10 workers. Although there are exceptions: Péndulo went from 15 to 80 people in the last three years, after committing to the production of a game of Tintin, the Belgian comic book character. “This is the formula for success, working with known universes,” Fortuny repeats, “although we also face a more demanding audience because the standards have been raised quite a bit due to the appearance of a large number of developers.”

In Spain, sales of games and consoles have maintained a solid pace since records began. The last few years have not be
en anything less. The industry grew by 12.1% in 2022, after billing 2,012 million euros. That same year, the community market generated 23,480 million in revenue, 4.3 times more than the digital industry and 1.8 times more than video services in streaming, according to a study by the European Commission. In the global framework, the Konvoy report estimates that the market reached a size close to 188,000 million dollars in 2022 (about 170,000 million euros) and that in 2028 it could reach 288,000.

Satvat explains that around 350,000 people work in the gaming sector worldwide and that the estimated layoffs represent only around 2% of the industry. Even so, the cuts “are still very worrying,” the expert clarifies. In Spain this figure is around 6,187 workers grouped in 618 studies, according to the AEVI.

According to the Tencent manager, who has built a popular website where it shares the employment opportunities of the sector and to which 9,000 people have attended, the employment recovery of the industry could arrive in the second half of this year, taking into account the pace at which employers open new vacancies and fill them. He believes studios must find a solution to the high cost of development, as well as figure out how to best integrate technologies like AI in the most appropriate way. For now, users of all ages share the sweet taste that 2023 left in terms of releases. The third edition of Baldur's Gate – a fantasy role-playing title – for example, became the highest-rated multi-console game of all time with a score of 97 out of 100 on Metacritic.

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