The video game industry said goodbye to a bittersweet 2023. On the one hand, great launches and strong sales of titles and consoles consolidated the good pace of an industry that is growing at almost 9% annually and prints more tickets than the digital and streaming industries. The bitter side, however, is that almost 9,000 industrial workers were laid off. This represents a record for cuts in a single year. The adjustment is being led by familiar faces from the gaming scene: Epic Games, developer of Fortnite; Unity, a well-known developer of platform tools; Niantic, owner of Pokemon Go, and Embracer Group, the European colossus that includes hundreds of smaller studios, among other things. Although the list is extensive: according to the web portal videogamelayoffs, which tracks layoffs in the industry, more than 80 studios have reduced their workforce in 2023.
The labor quake came at the beginning of the year. The American company Unity, responsible for games such as mobile games Hearthstone and Temple Run, laid off almost 900 workers in the first half of the year and another 265 workers in November, leaving the company with just 7,000 employees. US-based Epic Games, which owns Unreal (the preferred engine for developing 3D experiences), followed closely behind with 830 layoffs in September. And over the summer, Niantic, a pioneer in augmented reality gaming, laid off 230 employees, about 25% of its workforce.
Embracer Group, which operates 129 studios under its management, also reduced its workforce by 5% in November, equivalent to almost 900 employees. Amazon's video game business, in turn, laid off 400 employees. The changes included the closure of its Twitch channel, dedicated to industry programming, as well as its Game Growth product, designed to increase content from streamers. Other historic developers like Sega – the Japanese multinational developer of Sonic that recently acquired the mobile game Angry Birds – skipped 121.
However, January is far from the end of the year for cuts. Twitch announced a new round of layoffs affecting 500 employees – nearly 35% of the company's workforce. And Discord, the leading communication platform between gamers, announced this week that it would cut 17% of its staff (170 people).
The reasons for this are varied, but according to the same studies and the experts consulted, they are the consequences of a global downturn, added to the high growth expectations imposed during the pandemic. With millions of homes restricted by the coronavirus crisis, studies predicted the bonanza created by extending time at home would be inexhaustible. The phenomenon was not limited to the sector where Pac-Man originated. Large educational or on-demand music platforms like Netflix or Spotify also invested in producing exclusive content at a pace that they later realized was unsustainable. As part of the same plan, major technology companies such as Microsoft, Meta and Apple also reduced their workforce or slowed the pace of hiring.
Omdia analysts estimate that the video game industry generated $50 billion in profits in 2020 and 2021, leading to “growth expectations that the sector failed to sustain as production and workforce increases led to global spending in The consulting firm also points out that the weak pulse of promising initiatives such as NFTs and Metaverse is responsible for the decline.
Investments have also fallen sharply. According to the study by Konvoy, a consulting firm specializing in this industry, the industry received $14,492 million in private financing in 2022. While only 2,093 million were accumulated in the entire year of 2023. Amir Satvat, director of business development at Tencent, the industry leader in China, explains that currently a title has to be a success for the studio to cover its expenses. In addition, they no longer just compete with each other, but have opened new battle fronts against large entertainment platforms such as HBO or Amazon Prime. “The competition now is about screen time,” emphasizes Satvat.
The Chinese case
At the end of the year, the industry received news from China that TikTok's creator, ByteDance, would completely halt its foray into the video game industry – which it had relatively successfully landed as a competitor to Tencent. The decision included the closure or sale of the Nuverse brand, which focused on developing mobile titles and had success with releases such as Mobile Legends: Bang Bang. The announcement, which came Nov. 27 from an anonymous company source, did not specify how many jobs could be lost. However, according to Late Post data, the studio had around 3,000 employees in 2021.
Adding pressure to the Asian giant's industry is emerging: the government is waging an open campaign to combat addiction, particularly among minors who have limited hours to play during the day.
What's more, producing a video game is now almost as expensive as producing a movie, except that a console game can take up to twice as long to run. The fifth part of the legendary Grand Theft Auto saga, for example, cost around $265 million – almost as much as the Lord of the Rings trilogy – and took around five years to see the light of day. For the same reason, Satvat adds, “we can expect video game developers to choose safer options such as well-known stories and universes, as well as sequels to projects that have a greater chance of success.”
This argument is supported by Rita Fortuny, chief producer of Péndulo, one of the studios with the longest history in Spain. “It's something similar to what happened with the film industry a few years ago,” says Fortuny, who points out that video game development is no longer a golden egg machine. “Advertisers and investors now need more certainty that things are working economically, and the way to ensure that risk is significantly reduced is to work with brands that work. The task of developing very innovative mechanics has now been left to small teams that can afford to take a little more risk,” he explains.
Spain stays afloat
Fortuny also clarifies that the moderate size of the studios in Spain makes it more difficult for layoffs to occur. According to the Spanish Video Game Association, the average team staff in the country is around 10 employees. Although there are exceptions: Péndulo went from 15 to 80 people in the last three years after committing to the production of a game of Tintin, the Belgian cartoon character. “This is the winning formula, working with well-known universes,” repeats Fortuny, “although we are also dealing with a more demanding audience because the standards have been significantly raised due to the emergence of a large number of developers.”
In Spain, sales of games and consoles have maintained a solid pace since records began. The last few years have been no less. The industry grew by 12.1% in 2022 after billing 2,012 million euros. According to a study by the European Commission, the community market generated revenue of 23.48 billion in the same year, 4.3 times more than the digital industry and 1.8 times more than streaming video services. On a global scale, the Konvoy report estimates that the market reached a size of nearly 188,000 million dollars (about 170,000 million euros) in 2022 and that it could reach 288,000 in 2028.
Satvat explains that around 350,000 people work in the gaming industry worldwide and that the estimated layoffs only represent about 2% of the industry. Nevertheless, the cuts are “still very worrying,” the expert clarifies. According to AEVI, there are about 6,187 workers in Spain, summarized in 618 studies.
According to the Tencent executive, who created a popular website sharing job opportunities in the industry and which has been visited by 9,000 people, the recovery in jobs in the industry could occur in the second half of this year, given the pace, with which employers open new positions and fill them. He believes studios need to find a solution to the high costs of development and figure out how to best and best integrate technologies like AI. Right now, users of all ages are sharing the sweet taste that 2023 has left in terms of releases. For example, the third installment of Baldur's Gate – a fantasy role-playing title – became the highest-rated multi-console game of all time, with a score of 97 out of 100 on Metacritic.
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