Expert comment Last updated 15 April 2024
Programme & Creative Director Video Game Design & Production at Birmingham City University, Zuby Ahmed, has spent 15 years working in the video games industry as a developer and manager. He explores why we see thousands of job losses in one of the world's biggest entertainment industries and whether awards ceremonies still play a part.
Since 2023, the global videogames industry has seen over 18,000 people laid off, from large scale organizations to small independent studios. Layoffs; a cyclical occurrence which indeed goes back, many times over the short lifecycle of the videogames industry.
Reasons for large-scale layoffs vary from “areas of overlap”, “restructuring” to positioning for “long-term sustainability”. Underlying main reasons are ultimately the “burst of the covid bubble”, along with “profitability”, coupled with more effective leadership driving better planning.
What's behind the layoffs?
Large-scale companies are accountable to their shareholders; yearly shareholder meetings see companies being asked where their profit is, year upon year. The drive for increasing profits has resulted in a cascading effect of layoffs, across the entire industry.
When looking at the revenue streams of games today, depending upon the platforms they are released on, console games are relatively inflexible, some offering no early access, no access for audiences to participate within the creation process with mods, no easy development to store, unlike Valve with their Steam Platform. It resulted in AAA games predominantly sticking to traditional models, but with rising development costs, consoles games are pivoting to live service games, with games comprising of ongoing microtransactions.
The problem is that live service games need a strong and continued player base, and if they fall in numbers, then that adds another reason for studios laying off staff. It is also worth considering the traditional model of monetization within released products on consoles, that are not live service. Typically, development on large scale AAA titles exceeds $200m per title, so publishers need to see large amounts of units sold, just to recoup costs. That is a reason why certain console first party publishers are going multiplatform; they recognize the risks with releasing on one platform only.
Another factor to take on board is that consoles’ users have subscription costs to pay for using online services by their platform holders, whereas PC users do not. If a user were to play a multiplayer game on Steam, but in order to play the same console-specific multiplayer game they would have to pay a monthly fee on the console, why would they not switch to PC?
Without any monthly fee, PC platforms such as Steam hosts more players, offers more APIs, and even features workshops for creating mods, backed by large community hubs. More and more people are now realizing this and are stopping subscribing to console platforms.
Suddenly console online service providers earn less money from subscribers, so they need to increase the price of their online services to make up profits for their shareholders short term, which leads to more lost subscribers, which leads to price hikes, which leads to more lost subscribers. It's a vicious cycle.
It is also important to consider the growth of shareholder-based companies, which chase infinite growth. Over the last 5 years there has been a huge acquisition of global independent studios by large conglomerates. Whilst the pros mean there is strength in numbers under the support of one umbrella, this does have a double-edged sword. If ongoing investments falls through, this results in huge financial shortfalls that conglomerates then face, resulting in them having to rationalize ongoing costs by going through their acquisition portfolio. This can result in streamlining costs by laying off staff, sometimes entire studios under their umbrella.
Another factor to consider here is the role that AI has had in changing the development of games, which ultimately impacts developers, the skills they have and what AI can do instead of humans, which does impact costs, bringing down development costs. Ultimately shareholder-based companies ensure that shareholders are appeased.
Despite this turmoil, developers have successfully released games to market, which have been lauded, both critically and commercially. Ironically smaller development studios, some of which comprise of teams of less than 5 people, have had significant impact in competing with large scale studios sales in 2024, which is worth considering for those laid off.
Smaller studios are also strategically choosing which platform they want to relase on. By releasing on Early Access on Steam, typically at a low cost, developers of games such as Vampire Survivor, Palworld, and the recently released Deep Rock Galactic: Survivor are making their games accessible, which results in large sales in short amounts of time.
Can awards ceremonies still play an important role in the video games industry?
Using opportunities such as award ceremonies to celebrate industry successes can indeed be a necessary positive, if done correctly and appropriately. It is worth stating that the recent Game Awards earlier this year faced criticism of how the ceremony did not acknowledge nor comment on the layoffs during the last year. The ceremony was also criticized for being too marketing centric, choosing instead to spend its time to show off upcoming games, instead of providing the winners enough time to comment on their wins.
If done correctly and appropriately, Award Ceremonies should be a time to provide the industry and more importantly the developers who have made the games, with encouragement and recognition, whilst reflecting and commenting on the state of current play. By considering where the industry is and how successes can be achieved through ongoing turbulence, these events can be key points to reflect and recognize.
Awards ceremonies can provide beacons of hope for developers, to create fun games with impactful memorable moments. This ensures that developers worldwide, especially those who have gone through life-impacting events such as lay-offs, can individually reflect and remember why they got into the games industry in the first place, which is larger than both the film and music industry combined. This is so they are positively encouraged to keep on keeping on, in defining the future of interactive entertainment.