Thousands of job losses, closures… 2023 is a disastrous year for video game developers

2023-10-15 07:30:03

Gaming News Thousands of job losses, closures… 2023 is a disastrous year for video game developers

Published on 15/10/2023 at 09:30

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Hi-Fi Rush, Hogwarts Legacy, The Legend of Zelda: Tears of the Kingdom, Diablo IV, Baldur’s Gate 3, Starfield… even before the releases of Spider Man 2 and Super Mario Bros. Wonder, 2023 is already an incredible year when it comes to quality releases. But under the neon lights of the studios, the artists who make our games are facing a major crisis.

Summary

The year 2023, a post-COVID year rich in major releases…… but also a year affected by massive layoffsHow can we explain this crisis when gaming generates billions?

The year 2023, a post-COVID year full of major releases…

While there are still a little more than two months left before the year 2023 ends for good, we can already count the impressive number of titles that have enlightened us. In addition to quality remakes with Dead Space and Resident Evil 4, we were able to discover Hi-Fi Rush, Hogwarts Legacy, Diablo IV, Street Fighter 6, Octopath Traveler II, The Legend of Zelda Tears of the Kingdom, Baldur’s Gate III, Final Fantasy XVI, Armored Core VI, Starfield, Mortal Kombat 1, Forza Motorsport or even the Cyberpunk 2077 expansion, Phantom Liberty. Soon we will get our hands on Super Mario Bros. Wonder, Spider Man 2, Alan Wake 2 and Avatar: Frontiers of Pandora! Whether you’re a fan of RPGs, adventure games, fighting or cars, there is something for almost everyone. If all these soft drinks were dishes and the year 2023 was a table, we would be on the verge of a liver crisis with so much to drink and eat.

2023 can be seen as an anomaly, a bit like those crazy years of 1998 and 2007. The cascade of good games flowing uninterrupted since the surprise release of Hi-Fi Rush can be explained mainly by the effects of the post-COVID period. During the lockdowns, developers had to adapt and find solutions to limit physical exchanges between developers as much as possible. In an industry where open space is the norm and where the unexpected has – normally – no place, everything had to be turned upside down.

Faced with the urgency of the situation, teleworking quickly became essential. Electronic Arts, Ubisoft, Bethesda, Bungie, Rockstar Games and CD Projekt offered “remote working” to their employees from March 17, 2020. As for the main manufacturers, Sony, Nintendo and Microsoft have also made teleworking a norm for several months. For developers, it was necessary to install software giving remote access to their PC but above all to review methodologies as well as ways of working as a team. These transformations have naturally caused delays in current production, and many titles were finally able to be released in 2023 even though they were initially planned for 2022. Today, faced with the bottleneck of titles, some publishers prefer to postpone their games until later. We are thinking, for example, of Focus (Banishers) and THQ Nordic (Alone in the Dark).

… but also a year affected by massive layoffs

A great year for gamers, 2023 certainly is. Unfortunately, it is also catastrophic for developers. We have seen the closure of studios, such as Volition and Mimimi Games. In addition, over the last 10 months, layoffs have increased at an excessively rapid pace. Unity, Take Two, Electronic Arts, Riot Games, 343 Industries, Bethesda, The Coalition, Blizzard, Crystal Dynamics, Bioware, Epic Games, Naughty Dog, THQ Nordic, Striking Distance, Ubisoft, Creative Assembly, Team 17 and more recently Telltale Games …we witnessed mass departures.

The list is long, and the number of professionals affected is staggering: 8% at Unity (600 employees), 16% at Epic Games (830 employees), 6% at Electronic Arts (700 people), and to another extent 50 employees licensed at Team 17, 60 at Ubisoft, 25 at Naughty Dog, more than a hundred at 343 Industries, the “major part of the studio” at Telltale. The year 2022 also saw layoffs, notably at Blizzard and Unity, but the figures are not comparable with those of today in the video game industry. The wave of layoffs which affected the world of tech at the end of 2022 (Meta, Twitter, Amazon) has spread to the world of video games. According to the Videogamelayoffs site, around 110 video game companies have made layoffs, leaving more than 6,000 employees behind.

In 2022, the global turnover of video games amounted to 170 billion euros (according to Newzoo), experiencing a decline of 5% compared to the previous year. This recession has left its mark in 2023. After years of hiring and investment, tech giants and publishers alike have had to deal with declining sales and various post-COVID effects. The return to normal activities, following an acceleration during the pandemic, which comes at a time when a recession is raging, generates what the actors call “a readjustment”.

Furthermore, the political and economic context is getting tougher. The big names in video games are anticipating a coming crisis. 2023 is still viable but the market is saturated and the purchasing power of households will not increase with inflation. They believe that consumers will want to do two essential things: reduce their overall spending and/or increase the value for money of their purchases.

In this race for economic efficiency, companies are laying off workers knowing that if they do not do so, they might find themselves in difficulty compared to competing companies. In addition, GAFAM opened the way and showed that it was possible to part ways with hundreds, even thousands, of employees without it seeming to harm the organization. This short-term approach aims to save the furniture in the quarterly results by quickly discovering lines where it is possible to make savings. The success of subscriptions providing a catalog of games also tends to make players spend less money, and therefore reduce industry revenue.

Thanks to the multiplication of big releases in 2023, the console market should stabilize this year following a decline in 2022. Nevertheless, the fact of offering too many games, even very good ones, does not necessarily mean that everyone will have the right to their share of the pie. On the contrary, some analysts agree that players are buying fewer games but spending more time on them, especially at a time when service games are legion. As AAA titles always cost more to produce, sales that were considered good a few years ago (between 1 and 5 million) are sometimes no longer sufficient to ensure the profitability of a project. This explains why it is difficult to know whether Final Fantasy XVI is a poor performance (or not) for Square Enix, despite 80 million euros collected over one quarter.

In this hunt for efficiency to shine in financial results, large publishers are shedding talented developers in order to make rapid savings on personnel costs. At a time when industry giants are constantly evaluating themselves and tend to be trigger-happy, the bad news might continue to arrive in 2024.

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