Perspectives on the current layoff trends in the gaming industry

Where I give you the viewpoint of a person who was an entrepreneur through the boom bust and boom of the dot com era.

We can all see it happening. Massive layoffs from the post-Covid tech era are resounding now through the gaming industry as well. There are a lot of views on this on social and LinkedIn. Lots of cries for justice, and humanity, finger-pointing in the uncertainty caused by it, fist shaking at the C-Suite - these are all natural reactions.

Let’s take a look at a more down-to-earth look at it. What is happening now in the game industry is no different from what happened to tech in the Dot Com era. The game industry is doing very well and has been for the last decade. COVID brought gaming to the masses and out of the shadows. That not only showed the world how big we were and what financial impact we have - but it also awakened the greed and interest of outside parties in the gaming industry.

The industry experienced accelerated growth during this period - something that was falsely identified as a gaming golden age.

How did we get here?

We had the boom period during the Covid years and the two years thereafter. Venture Capital arrived in gaming. So did a lot of tech side investment into games. This was a lot of money - but it was dumb money. Money that neither knew nor understood gaming.

This is where VCs who started studios and gave them just enough money to build and launch one game came in. Despite there being ample evidence to historically show that hardly any studio had ever succeeded with one game and often needed 2-3 games to build an audience.

This is where even veteran gaming publishers and companies went mad and strangely thought that if they started indie labels and published 50 retro-styled roguelites a year everything would go amazingly forever!

This was the period where experienced game companies thought that if they grabbed at anything moving and became a bigger game company that meant they would be more competitive and that gaming audiences would love them.

This was the period went the industry became so full of itself that it thought it mattered more than the consumer and that if they built it and spent enough money doing it - gamers would come to them like sheep - so web3 gaming, NFT gaming, play to earn and blockchain came and went.

The Consequences

Anytime an industry grows beyond its market size to manage its growth - there must be a correction. That is what is happening now. For the first time ever there are more game companies making more games than anyone needs and too many games coming out for anyone to play.

There is no choice but to cut the industry down to size. The mass layoffs and studio closures are a visible side effect of that. That of course has many follow on results. If you shut down an AAA studio, hundreds of jobs are lost. But that is not all. The satellite studios that invoiced that studio for co-development get hit and it dies. The freelancers who worked for the satellite studio were hit and they failed. It’s an industry-wide ripple because the entire industry is connected. We only hear about the big studio going down - we do not hear about the ripple.

We also do not hear about the hundreds of indies that get affected because the saturation of games in the marketplace makes it impossible to effectively compete on marketing - and thus they fail.

I saw a statistic showing that around 6.3k jobs had been lost in the game industry in 2023. That is not even remotely close to the actual number, because it only counted the bigger studios we know about. The actual number is likely to be around 2x to 3x that at this point industry-wide.

Is it over? Definitely not - it has barely started. Late 2022 was the starting gun, 2023 was the year everyone else figured out it was happening, and late 2024 - this will still be reverberating.

It is interesting to note that this largely affects the western markets. The Asians kept their cool during COVID-19. No outsized expansion happened, and no crazy consolidation happened. They stayed focused on quality and consumer value and are now poised to be the big winners over the coming decade as they eat into the weaker market stability of the Western markets during this period.

As always there are winners and losers.

How Should We React?

At this point it should be clear to everyone - there is no stopping this. From an industry point of view, this is not a bad thing. As a person who came from tech, I often found the game industry immature in its processes, corporate structuring, and focus on sustainability. It’s been a gung-ho, money-tossing around, sometimes money-making, people-churning entertainment industry not unlike movies. However, we are not movies and this is not a viable growth model and is not sustainable.

This destructive wave that is happening now is taking out or diminishing a large number of endemics and last-generation game companies. They are either going to fail or be forced to consolidate making them less dominant and less competitive against a new wave of consumer-focused game companies doing things differently. This is a necessary cleansing of a global industry that must happen and similarly, the dot com bust was the best thing that could have happened to tech. Don’t dwell on it or be stopped by it - this is a free market economy correcting itself - you cannot stop it by being offended by it or yelling at it.

It’s putting pressure on platforms for greater competitiveness and driving down developer fees, attacking platform dominance like Steam, and introducing many new routes to market that are creating great consumer value.

This is also a great growth platform and paving ground for a new generation of gaming companies and leaders to emerge to craft the next generation of games and game operations.

It just doesn’t feel positive right now - because there is too much focus on the negatives. Since 2019 the game industry added hundreds of thousands of jobs. Yes, we are indeed about to lose tens of thousands of those - but it’s a low double-digit % of the global job pool in the game industry. It just doesn’t feel that way when it’s happening to you.

How should the Talent React?

Despite being the head of my company I am also the lead game developer and designer of the company and thus consider myself part of the talent. When you are the talent it’s easy to think of yourself as important. In this period, it’s important for us to look at the wider picture objectively.

The job of a CEO is to serve the shareholders and the company first. It’s the job of employees to serve the mission of the business and get value in return. This is the nature of a well-functioning company.

Just because a company is profitable, doesn’t mean it needs you or me in it. Companies do not exist to create jobs for everyone and nobody is entitled to a job because we exist. Because this isn’t Marxism and isn’t going to be ever.

To make matters worse, there is a massive talent overload. With remote jobs now being the norm an employer has access to a world of talent. Ubisoft does not need to pay £35k/year for a QA person in the UK if they can get one in India for £500/month. That is not Ubisoft’s fault, they are not required to hire the UK QA person, nor is the UK QA person entitled to his £35k/year no matter what.

As the talent we have to understand that there is no time in human history where technology and creative talent have been in abundance and in the quality standard to the degree it is now. Something that is easily attainable, readily available, and cheaply acquirable - is not valuable.

In the current state of things, if you lose your job in the game industry - it is unlikely you will be getting your next job in the game industry right now. The amount of jobs being created is very small in comparison to the global haircut the industry is receiving - so a more intelligent approach is needed.

Here is what I did: I come from a lengthy background in tech product innovation and entrepreneurship. That skill set and its results over the last 25 years make for a perfect setup for the operator > investor switch - as such I am pivoting to the investment side. Still essentially staying adjacent to gaming - but using my skill set correctly in a new path. Jobs in gaming have a few hundred applicants each, jobs open at VCs, and funds have 100 applicants or less each. Much better odds.

Are you a developer?: Look at jobs in product-based software companies, AI and deep tech companies where C and C++ are in high demand.

Are you a level design and or game designer?: Look at ArchViz companies, that industry is booming.

Are you an artist or an asset developer?: Look at capitalizing on your work on engine marketplaces and third-party marketplaces (studios are leaning on these more and more) and look at digital services businesses like digital agencies or branding companies that regularly make use of that skill set.

The Winning Mindset

Do not wallow in self-pity and also do not wallow in self-agrandisation or entitlement. This is the first world in the 21st Century - nobody is entitled to job security. Also, do not define yourself as lower than you are, and do not hang yourself to the game industry at all costs. Do not simply survive - instead, adapt and thrive.