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Layoffs and Closures: The Unpredictability of the Game Industry

Written by Shania Kuo

The video game industry is a young industry, especially compared to other entertainment fields. Many young workers enter the game industry to work on a game that hopefully millions of players will enjoy. However, the novelty of a new video game often obscures the game industry’s fragile infrastructure and its employee’s fears of job security. These fears seem baffling given the lucrative state of the video game industry, but the money that companies make are a very different tale from the struggles employees face. In the game industry, job security is far from the norm.


In fact, instead of job security, layoff cycles are more likely than staying in a company after a game launch. Most of the time, employees can’t control the reason behind their layoff. It’s not negligence or incompetence. Instead, the company often just needs to cut costs or “headcount” (Schreier 2014). According to Holden Link, a game developer who runs the layoff-tracking website GameJobsWatch, “Every time one project ships, the next one should be 'ramping up.' The 'seasonal layoffs' happen when things in that cycle don't go as planned. Maybe one of the projects got cancelled. Maybe it simply got delayed. Any change of plans like that can lead to layoffs” (Schreier 2014). These unplanned delays hit independent studios the hardest. Without big financial backers, studios often cannot pay their staff.


The layoff cycle isn’t just a single period where companies axe employees. One example is Ready At Dawn, a video game studio who worked on the God of War games for the PSP. Despite some success it had found with the series, the studio had trouble convincing publishers to buy other prototypes. In July 2010, the studio laid off 13 people but re-filled those same positions six months later. For outsiders, the situation is baffling, but it’s not uncommon in the game industry. According to one ex-employee, the studio laid off the 13 employees because the development team didn’t need those people for pre-production. Since they weren’t necessary, the publisher, Sony, refused to pay for unneeded developers. Without Sony’s help, Ready At Dawn couldn’t afford to keep paying those people during pre-production, but Sony’s budget allowed for the studio to hire people for the 13 positions once The Order: 1866 entered full production. According to Link, “It's weirdly common to hear about people getting laid off from the same company more than once—i.e., they get laid off, rehired, and laid off again in a span of two or three years, often without a different job in between” (Schreier 2014).

Another reason for layoffs in big-budget game development is oversaturation. Publishers will set a hard release date for a game to maximize sales. Reaching that deadline requires development studios to hire as many people as possible, which leaves the studio bigger than it can afford once the game launches. As a result, despite major publishers being publicly traded companies, letting go of staff becomes a regular occurrence. For companies, the number one priority is keeping the shareholders happy and to prevent poor earning reports, publishers save money by cutting down on employees. One example would be in 2019 where Blizzard announced that it would lay off approximately 800 employees despite having a “record year” of profit. CEO Bobby Kotick offered context, explaining that the layoffs were part of a larger plan to restructure the company to focus on core franchises while laying off underperforming initiatives and non-development costs. Blizzard stated that they would allocate a 20% increase in developer resources (Valentine 2019).


Unfortunately, companies within the game industry don’t take into account the hidden costs of laying off workers. According to a study done by Cascio, “Companies lay off employees expecting that they would reap the economic benefits as a result of cutting costs (of not having to pay employee salaries & benefits). However, ‘many of the anticipated benefits of employment downsizing do not materialize’” (2009). Reasons behind the lack of expectations that are relevant to the gaming industry are potential lawsuits from employees, loss of trust in management, low-morale, and decreased productivity among survivors. In the game industry, layoff notices often come with little prior notice and many times without severance, so while severance is often a cost to other industries, the game industry doesn’t face that burden as much although lawsuits often arise. There are a few exceptions such as EA where one ex-staff member said that the company would offer “above industry standard” severance practices and often try to relocate laid-off employees in other studios (Schreier 2014).


These lawsuits are often a result of the intense emotional and physical stress employees face after being laid off. According to Landy and Conte, the effects of job loss include poor psychological health, depression, insomnia, irritability, lack of confidence, inability to concentrate, and general anxiety. The reasons are that job loss reduces income and daily variety, suspects typical goal setting guiding day-to-day activities, fewer decisions made because there’s little to decide about, new skills do not develop and current skills atrophy, and social relations change radically (2013). Besides the mental, physical, and psychological costs, there are emotional and financial costs. Luo and Three-Brenan shared a poll of unemployed adults. They found in unemployed Americans that, emotionally, 69% are more stressed, 55% have more trouble sleeping, 48% have experienced emotional or mental health issues, and 46% have felt ashamed about being unemployed. Financially, 53% have borrowed money from family members or friends since losing their jobs, 54% have reduced visits to doctor or medical treatments, and 47% are without healthcare coverage (2009). Even once employees find a new job, especially for those in the game industry, there is a lasting feeling that the job will not be permanent. New jobs often mean relocation and one developer noted,

"I have moved my family more than seven times over the last 16 years, across the country and up and down the west coast. I'm a pro at living with very few material possessions, as I grew tired of lugging them around. As you can imagine all those moves put an enormous stress on relationships, both personal and professional. Your circle of immediate friends shrinks to zero with every move" (Schreier 2014).


Clearly, being laid off is a devastating event on all fronts for individuals. However, that doesn’t mean life is any easier for those spared from the layoff cycle. “Survivor’s guilt” often appears in those who remain after mass layoffs. Even once workers find the motivation to get back into swing, the effects of the layoff still resurface during development, which can hinder work productivity. One developer noted that he sometimes sees old co-workers at the Game Developers Conference (GDC), but that he has no idea how many people don’t go to GDC because they left the industry (Nelson Jr. 2019). Losing talent because of lack of job security is an issue the game industry faces regularly. And studios are seeing the lack of experienced talent as studio closure grows (Rivera 2018).


It’s no wonder why employees are calling for the game industry to unionize given the brutal working conditions and instability. According to the 2019 annual survey conducted by the International Game Developers Association, 47% answered “yes” and 26% answered “maybe” in response to if employees think game workers should unionize (Weststar et al. 2019). Kate Edwards, who served as the executive director of IDGA from 2012 to 2017 and now advocates for diversity and fairness initiatives in gaming, stated that this change is representative of the industry’s maturation. Despite many talented developers leaving the field, there is still a large base of experienced workers who aren’t as able to work the long crunch hours as they enter their later years (Dean 2019). However, according to Sam Roberts, assistant director of USC’s Interactive Media & Games Division, unionization is not likely to happen very quickly because of fear of employer retaliation as the industry is reliant on young employees willing to work long hours at low pay (Dean 2019). So while unionization is definitely something that game workers are slowly working towards, it’ll take larger institutional changes to allow for them to push through.


Studio closure is another huge reason why job security in the game industry is so uncertain. From 2017-2018 alone, 10 studios closed including Motiga, Visceral, Telltale Games, Boss Key Productions, Runic, Carbine, The Bartlet Jones Supernatural Detective Agency, Wargaming Seattle, Capcom Vancouver, and Gazillion Entertainment (Lahti). Between these 10 studios alone, approximately 918 employees were laid off (Runic and Carbine did not report their number of employees). The closure of Telltale was especially shocking for the game industry. Telltale was an award-winning studio, famous for TV miniseries-like games. With a deal with Netflix and a series of other projects on the backburner, it didn’t seem as though Telltale was on the verge of closure. However, the sudden lay off of 200 staff employees without severance is telling of the game industry’s weak foundation (Gach 2018).


The reality for many studios is that there are too many games flooding the market. On Steam, a digital PC game storefront, had seen 7,672 new releases in 2017 alone (Rivera 2018). With the constant influx of games flooding the market, success without huge publishers backing developers are often minimal.


That doesn’t mean corporate money is the best option for independent studios. In fact, studios bought out by corporations see a higher likelihood of shutting down much. Electronic Arts (EA) has a long history of such actions. The studios bought out by EA and subsequently closed down include Visceral, Origin Systems, Bullfrog Productions, Westwood Studios, and Mythic Entertainment. Bioware is a prominent studio bought by EA that is still open, but it’s been left a shell of itself. They had created the famous Mass Effect series that eventually led to its fall from prominence. When EA bought Bioware in 2008, Bioware created great story-driven games including Mass Effect 2 until the co-founders and driving forces behind story-driven RPGs left in 2012. The release of Mass Effect 3 was followed by controversy and Mass Effect: Andromeda’s launch in 2017 was met with similar failure. In response, EA stopped the Mass Effect series and shut down the Bioware Montreal Studio that created Andromeda (Murnane 2017). When examining the pattern of closure for studios EA bought, there tends to be a two-stage pattern. First, small development studios making great games take EA’s lure for money and then the people who made those creative games leave the company because of EA’s corporate restrictions (Murnane 2017).


Huge companies like EA don’t foster the creativity of the studios they buy. Instead, they demand that the studios push out what companies believe are money-makers which drive away the creative minds that attracted the companies in the first place. Then, when the studios underperform, the companies close down the studio (Murnane 2017). Unfortunately, for many studios to produce games, studios accept the promise of corporations’ money even if in the end, it was worse for them.


The question arises then on how can studios stabilize to prevent closure and layoff. Unfortunately, there is no easy decision right now, especially since a lot of these decisions rely on the decisions of huge companies. However, at the very least, companies and their management need to start listening to the plights of workers. There are companies in the game industry that are fairly resistant to layoffs such as Ubisoft and Nintendo. And as CEO Satoru Iwata explains,


If we reduce the number of employees for better short-term financial results, however, employee morale will decrease, and I sincerely doubt employees who fear that they may be laid off will be able to develop software titles that could impress people around the world. (Schreier 2014).


Corporations seek to impress their shareholders, but as talent leaves the game industry because of instability, something will eventually need to give. For the sake of current developers, companies need to make the push to treat their workers better.


References

Cascio, W. F. (2009). “Employment Downsizing: Causes, Costs, and Consequences”

https://link.springer.com/chapter/10.1007/978-3-8349-8945-1_9


Dean, S. (2019). “Here are all the major game studios that have closed in the past year”.

https://www.latimes.com/business/technology/la-fi-tn-video-game-union-movement-20190412-story.html


Lahti, E. (2018). “Here are all the major game studios that have closed in the past year”.

https://www.pcgamer.com/here-are-all-the-major-game-studios-that-have-closed-in-the-past-year/


Landy, F. J. & Conte, J. M. (2013). Work in the 21st century: An introduction to industrial and organizational psychology (4th ed.). https://psycnet.apa.org/record/2012-25976-000


Luo, M. & Thee-Brenan, M. (2009, December 14). Poll reveals trauma of joblessness in U.S. https://www.nytimes.com/2009/12/15/us/15poll.html


Murnane, K. (2017). “Visceral Games Joins A Long List Of Studios Closed By EA”.

https://www.forbes.com/sites/kevinmurnane/2017/10/24/electronic-arts-where-video-game-development-studios-go-to-die/?sh=436f30986462


Schreier, J. (2014). “Why Game Developers Keep Getting Laid Off”.

https://kotaku.com/why-game-developers-keep-getting-laid-off-1583192249


Valentine, R. (2019). “Activision Blizzard sees "record year," plans to lay off hundreds”.

https://www.gamesindustry.biz/articles/2019-02-12-activision-blizzard-sees-record-year-plans-to-decrease-net-headcount-by-8-percent


Weststar, J., Kwan, E., Kumar, S. (2019). “Developer Satisfaction Survey 2019”.

https://s3-us-east-2.amazonaws.com/igda-website/wp-content/uploads/2020/01/29093706/IGDA-DSS-2019_Summary-Report_Nov-20-2019.pdf

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