2023-11-01 05:23:12
From November 1 to 5, the French capital hosts Paris Games Week, the largest French video game show. At the end of the month, the African Electronics and Video Games Festival will be held in Abidjan, Ivory Coast. The opportunity to take the pulse of a sector which apparently displays insolent financial health but which, at the same time, is increasing the number of layoffs.
Published on: 01/11/2023 – 06:23
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In some ways, this year is one of the best – some even dare to say “ the » best – in the history of video games. The 2023 vintage is indeed exceptional: this year they were released Zelda Tears of the Kingdom, Baldur’s Gate 3, Diablo 4, Starfield, Spiderman 2 (which as its name does not indicate is the third episode of the series), Super Mario Wonder, Assassin’s Creed Mirage…
Many have been critically acclaimed but all, without exception, have sold more than a million copies, sometimes in just a few days (or hours). We must add the successful franchises of which a new episode is released every year: EA Sports FC 24 (which succeeds the series of FIFA) and the latest Call of Duty, Modern Warfare 3, expected on November 10. A license with 450 million copies sold passed since October 13 into the fold of Xbox following the largest acquisition in the history of the sector was definitively validated: Microsoft has swallowed Activision Blizzard for $69 billion. One last figure: in total, the video game industry is worth more than 215 billion dollars, twice as much as the cinema and even eight times more than the music industry.
Wave of layoffs
And yet, there hasn’t been a single week in 2023 without announcements of layoffs or studio closures. So much so that a developer created an Internet site listing all announcements of this type. At the end of October, there were 120, with between a handful and up to several hundred people laid off each time.
No one is spared: even Epic Games, which owns Fortnite – the closest thing to a goose that lays the digital golden eggs (the game grossed $6 billion last year) – announced more than 800 job cuts in September.
Latest to date, we learned this week that the Bungie studio, bought by Sony for more than 3 billion dollars last year to respond to the acquisition of Activision by Microsoft, was also going to lay off part of its teams. The phenomenon has grown to such an extent that the specialized site TheGamer proposed a standard (and squeaky) version of the press releases published by the studios to announce these downsizing. “ It’s hard to lose friends at work, but we know in our hearts that our dedicated employees will be too afraid not to take over the jobs of five people », they parody.
Covid has played a dual role in the current situation
How can we explain this apparent contradiction? The first explanatory factor is to be found in the Covid-19 pandemic. When governments, panicked by the spread of the virus, implemented lockdowns, video games suddenly found themselves adorned with all the qualities: a cultural activity to practice at home allowing maintain social connections despite the distance but also can occupy the children when schools remained closed.
Result, practice has surged and the phenomenon came to boost sales. So, the publishers made the mistake of thinking that it would last forever and increased recruitment. In this sense, the current wave of layoffs in video games is similar to that experienced the tech sector as a whole in 2022.
Covid has also disrupted the development process of many highly anticipated games whose release has been postponed until 2023. This is the case of Starfield, the first new license from the Bethesda studio in 25 years, whose initial release in November 2022 was postponed for 10 months. There is no shortage of examples and this is partly what explains the bottleneck of releases we are seeing this year.
Especially since the video game is very far from being limited to large productions : on Steam, the main computer sales platform, 13,500 games were released this year (compared to 12,500 in 2022). 80% generated less than $5,000 in revenue. And as in cinema, the success of big blockbusters sometimes comes at the expense of smaller productions. It’s even worse: video game blockbusters offer dozens, even hundreds, of hours of play and players’ time is not infinitely extendable.
« $81 million per licensed developer »
And then there is the general economic climate: inflation weighs on players’ budgets. Their wallet is not infinitely expandable either. Inflation has above all led to an increase in interest rates which has made investors more cautious. Developing a game takes years, is often very expensive and in the current climate, some studios have preferred to cancel ongoing projects whose profitability was more difficult to guarantee.
And it is the developers who pay the price. Egyptian-born Dutch consultant Rami Ismail, one of the most respected voices in the industry, had fun with a calculation a little absurd but very telling: « In 2023, the video game industry is expected to generate more than $490 billion in revenue. Or $81 million per licensed developer ».
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