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Gaming industry in mass layoffs

Electronic Arts fired 670 people in February

Electronic Arts fired 670 people in February

The video game industry is in a state of panic. This story would have passed me by had it not persisted. YouTube is inundated with videos decrying the shocking layoffs rocking the industry.

Electronic Arts fired 670 people in February. Layoffs from Xbox reached a whopping 1900 people. PlayStation was no better, ejecting 900 employees from its workforce. Dot Esports reported that after laying off 60 people, Activision Blizzard’s esports division had 12 full-time employees left.

This puts the total number of layoffs from 2023 at 10,500. With 5,900 layoffs in the first three months of this year already, 2024 is expected to significantly outpace 2023. I don’t pay nearly as much attention to video games as I do to movies, TV shows and books, but layoffs in the current economic climate are not surprising.

Our planet has endured two major crises in the last four years. First came the pandemic, which decimated businesses, but before the economy could recover, Russia Invaded Ukraine, throwing international politics into chaos.

Most countries are faring better than expected, but according to a January 2024 World Bank press release, the end of 2024 will mark “the slowest half-decade of GDP growth in 30 years”.

Global growth, which had already fallen to 2.6 percent in 2023, will drop to 2.4 percent in 2024. Given those factors, I couldn’t understand
why gaming pundits kept portraying the economic downturn in the video game industry as an extraordinary occurrence.

Possibly, gamers are perplexed by these layoffs because 2023 was a fantastic year for video games. Don’t forget that ‘Hogwarts Legacy’ was a blockbuster, selling more than 20 million units.

‘Marvel’s Spider-Man 2’ broke PlayStation records after selling 2.5 million units in 24 hours (5 million in 11 days). At its peak, ‘Palworld’ had an astounding three million daily active users, becoming the biggest third- party game pass launch in Microsoft’s history.

Gamespot added even more context to this conversation by pointing out that video games made $184 billion in 2023. That same year, Microsoft bought Activision Blizzard for $70 billion, and it was not the only significant acquisition in the news.

Despite laying off 670 people in February, Electronic Arts boasted about its strong financial performance in the company’s earnings report. If the video game industry is firing on all cylinders, why are developers laying off so many people?

Covid-19 was good for video games, because everyone was stuck at home. As a result, the industry recorded a staggering increase in gaming sales. Game developers responded to the temporary spike in demand by opening new studios, commissioning new games, and hiring new workers.

Some industry veterans left major companies to open their own video game studios, and investors were more than happy to fund them. This allowed small start-ups to secure talent by offering heftier wages and benefits.

But then Covid-19 went away and people went back to work. As if that was not enough, inflation went up because of the Russia/Ukraine war.
Meanwhile, many gaming companies were saddled with bloated teams of workers whose salaries they would have to increase to compensate for rising inflation rates.

Additionally, the cost of video game development was skyrocketing ($300 million for ‘Spider-Man 2’ alone) at a time when consumers had vehemently opposed a hike in prices.

These layoffs were inevitable, especially when investors saw the writing on the wall and lost their enthusiasm for the industry. Does that mean video games are in trouble? Should we expect a catastrophic collapse like the Real Estate industry suffered in the late noughties? No.

The industry is still thriving. Many of your most anticipated video game titles will hit their release dates this year. The average consumer won’t notice the grumbling happening behind the scenes, which is a shame because some of the individuals responsible for bringing you so much joy will struggle to pay rent in the coming months.

katmic200@gmail.com

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