You may have noticed that there have been many layoffs in Western game development and the gaming press recently. There’s a lot going on here, so let’s get into it.
There are a bunch of factors at play as to why companies are going under or just downsizing, and the reasons differ from game development to the gaming press.
So let’s start with the big one.
Game Development Budgets Have Been Massive And Unsustainable
As I have pointed out in many of my previous articles, the reckoning is now finally here. Game development budgets have been massive and unsustainable, and the bough has broken. The reason this didn’t have a direct and immediate effect earlier on is down to two factors. The first is that games take several years to develop and once they are released the overall costs aren’t often honestly appraised in the backend. Managerial jobs would be put at risk, so the delayed release coupled with management trying to hide overspending means the problem persists. The second issue is the overall demand of games. This shields a lot of rot within gaming, and while mobile games and mid-tier games have been very profitable, the strong demand of gaming in general has shielded these big budget projects, even when they lose a lot of money. However, these expenditure issues could not go on indefinitely and now we are having a reckoning, in part catalyzed by two other factors.
The increase in inflation has effectively made money more expensive, especially if you are borrowing it. This means bigger expenditures, such as massive game development budgets, need to be slashed in order for the rest of the company to survive. This has also impacted the gaming press more, as the margins for that are very tight these days.
Elon Musk’s Layoffs At Twitter/X
When Elon Musk ousted the bulk of the staff at Twitter/X, it seems to me that sent a message to the US and European tech industry that this was an option for them as well. As gaming is somewhat adjacent to those industries, it was only a matter of time until gaming management tried the same thing. Coupled with the massive game development budget issues and inflation, this helped to instigate an Elon Musk-esque purge of staff.
What About Japan?
Well, this is where it gets interesting. Firstly, Japanese game development budgets have been a lot smaller than their Western counterparts. There is more focus on mid-tier games and the Switch has brought the focus back onto gameplay over graphics. Both of which reduce costs. Secondly, it’s very hard and expensive to lay people off in Japan. The law protects permanent employees very aggressively. Admittedly, companies here try and figure out workarounds, but thankfully the government has been pretty diligent at closing the bulk of those loopholes. Such as in forcing temporary contract employees to be hired full time after a certain period. In short, Japan will weather this situation better than its Western counterparts, as there is not much in the way of over spending to compensate for.
So What Happens Now?
Well, a much-needed downsizing in the US and Europe of game budgets and a diaspora of creative talent. Lots of new and small game developers will spring up and focus on better games rather than bigger games. I would have preferred this to have happened before all these layoffs occurred, as not everyone will survive this and that is in itself an unnecessary waste of people and talent. However, the correction that needed to occur at the bigger budget end of the game development spectrum needed to happen, otherwise the whole medium would have gone under. I just wish it had been figured out earlier in a more intelligent, insightful and less wasteful way.
Read my Forbes blog here.