‘I’ve Never Seen It This Bad:’ Game Developers Explain the Huge Layoffs Hitting Riot, Epic, and More

In August of last year, Ascendant Studios developer Aaron (name changed for anonymity) was ready to take a well-deserved victory lap. He had crunched hard with many of his colleagues in the final sprint to complete Ascendant’s debut game, Immortals of Aveum, but the team had finally done it. He attended a launch party in the Bay Area where he celebrated with his colleagues, some of whom he said had to pay partially out of pocket to make the trip. But while the event was supposed to be jubilant, there was an uneasy atmosphere: it seemed like Immortals of Aveum wasn’t performing especially well. At the party, developers kept asking leadership how the game was doing, only to be met with non-committal answers.

A few weeks later, almost half of the studio – Aaron included – had been laid off, with managers citing Immortals of Aveum’s underperformance.

Ascendant Studios was just one of numerous studios that has laid off a chunk of its workforce in the last year, and a half as part of an ongoing trend of mass layoffs impacting studios large and small. There have been many attempts to answer the question of why exactly this is happening, with analysts, CEOs, and other industry experts weighing in on discussions trying to explain it. The commonly-cited villain was fairly straightforward: COVID-19. Take-Two CEO Strauss Zelnick actually put it quite effectively to us when we asked him about layoffs last November:

“With regard to the industry, I do think people got a little fat and happy during the pandemic,” he said. “I think there was a perception on the part of many that the music would never stop.”

Zelnick was stating a refrain we’ve heard elsewhere: the big surge in spending during the pandemic effectively tricked a lot of companies into overspending, overhiring, overestimating. Then, when games revenues leveled back out in 2022 or so as gamers left the house again, cuts had to be made. The ESA has touted this explanation, as has the IGDA. A Tencent business development director told NPR the same thing. It’s a likely and understandable explanation given the havoc the pandemic wreaked everywhere.

But it isn’t the entire story. Layoffs like the ones at Ascendant don’t fit in with the pandemic narrative. And with over 10,000 layoffs in 2023, and over 6,000 more in 2024, simply saying that companies got a little too eager during a global pandemic is starting to sound overly trite. Even executives are starting to sense they can’t rely on this explanation. In Riot Games’ public statement explaining the reasoning behind layoffs affecting 530 individuals, or 11% of all of Riot Games, Riot admitted that the decisions that led to these cuts were made long before the pandemic began:

Since 2019, we’ve made a number of big bets across the company with the goal of making it better to be a player. We jumped headfirst into creating new experiences and broadening our portfolio, and grew quickly as we became a multi-game, multi-experience company — expanding our global footprint, changing our operating model, bringing in new talent to match our ambitions, and ultimately doubling the size of Riot in just a few years.

Today, we’re a company without a sharp enough focus, and simply put, we have too many things underway. Some of the significant investments we’ve made aren’t paying off the way we expected them to. Our costs have grown to the point where they’re unsustainable, and we’ve left ourselves with no room for experimentation or failure – which is vital to a creative company like ours. All of this puts the core of our business at risk.

In this letter, Riot publicly admitted a problem that’s been quietly festering across the entire games industry: there’s something deeply wrong with how video game executives are choosing to spend their money, and rank and file developers keep paying the price for it.

For this piece, I spoke to over 40 game developers whose companies had been impacted by layoffs in the last year. They shared with me the explanations companies gave them for what was causing the sudden loss of their livelihood, but they also told me why those explanations didn’t always seem to match reality. While the details in each story vary, almost all of them painted a picture of the games industry as an increasingly volatile environment fraught with high costs, growing risks, and increasing volatility. And often, developers say, those in charge of navigating that precarious environment have little regard for the hundreds of developers who pay the price when things go wrong.

Moving Fast and Breaking Things

The repeated story of companies being forced to reckon with pandemic overspending and overhiring may not be the whole story, but it’s certainly part of it. A number of those we spoke to told IGN they worked at studios that ballooned in size, investment, or number of projects during 2021 and 2022. Some studios hired dozens, even hundreds of new employees. Some started multiple new projects, or invested in initiatives outside of video games.

Many others went on acquisition sprees, with companies like Embracer Group gobbling up studio after studio and growing to enormous, unsustainable size. Then, when the surge of pandemic revenue leveled off, companies couldn’t keep up with the costs of maintaining all those studios and projects, and began to shut down and condense them. One anonymous source we spoke to who was laid off from two different gaming companies last year said that at least some of the overspending trend may not have even been motivated by a desire to get as big as possible. They felt that some studios saw the writing on the wall and expanded out of a misguided sense of self-preservation.

“The larger tech companies, I think, also understood that all of their competition would be growing during this period,” they said. “They felt they had to artificially inflate to stay competitive in the market and survive the crash when it came if they could.”

In some cases, that inflation meant betting on new technologies, even long after those technologies had proven risky. One former employee of OliveX, a company that claims to be making a fitness metaverse on the blockchain, called management “chronically shortsighted,” saying that “they bet on NFTs, and lost. Then six months later they bet on NFTs again and lost again. A couple of hundred people lost their jobs as a direct result of the CEO learning nothing.”

They went on to describe the company making multiple investments in NFTs and blockchain tech, as well as acquiring multiple other companies, only for those investments to backfire repeatedly and the workers of the recently acquired companies to be let go en masse. “There didn’t seem to be any strategy or plan other than KEEP MOVING and by the time we were laid off the CEO had sacrificed hundreds of employees to keep moving towards a destination that we never got any closer to,” they continued. “…When you move fast and break things you BREAK THINGS. Three offices minimum closed, throwing hundreds of employees out into the most hostile job market in years.”

When you move fast and break things you BREAK THINGS.

Blockchain tech wasn’t the only investment space where workers reported similar patterns. Epic Games laid off 800 employees in September in what CEO Tim Sweeney called a “survival move” that would allow the company to continue to pursue its metaverse initiatives. Speaking to IGN, multiple former employees suggested the financial situation Epic found itself in stemmed from a pattern of irresponsible spending on initiatives that didn’t seem to have a clear strategy behind them, from a rash of acquisitions to Sweeney’s ongoing metaverse dreams. Then, when it came time to account for that spending to investors, the company seemed confused as to how it had gotten there in the first place and started encouraging individual employees to find ways to cut costs.

“A lot of that turned into people eliminating waste, especially things like servers and storage that didn’t need to be running, or at least could be scaled down,” said one current employee who was there in 2023. “I don’t know how much money was ultimately saved but it wasn’t uncommon for people to be finding millions of dollars of waste – pretty reasonable IMO when you’ve got a game as big as Fortnite, this stuff can easily be overlooked and it’s not like it’s really killing the company.”

At the time, they said, Sweeney told employees Epic was taking actions specifically to avoid layoffs, including cutting everyone’s quarterly bonuses in half. They also recalled being told the company had billions in the bank, and could weather the storm. Then in the summer, raises and promotions were delayed after performance reviews. And shortly after, the layoffs happened. No amount of waste removal had managed to save 800 Epic employees from Sweeney’s self-described “unrealistic” belief that Epic could spend more than it made in order to build a metaverse. Nor has the loss of 800 employees appeared to have changed Sweeney’s unrealistic belief. Just days ago, Disney purchased a $1.5 billion stake in Epic Games to fund a “persistent, open and interoperable ecosystem” that incorporates the two brands. It’s an extraordinary amount of money…five months too late to help the people who needed it.

Where the Money Goes

While the sources I spoke to at Epic did largely praise the company for at least trying to take other cost-cutting measures to avoid layoffs, other developers told me their companies seemed content to spend freely until the last possible moment. One developer I spoke with told me about a mobile gaming company that threw “a considerably expensive week-long event,” including flying in employees from overseas, just two months before laying off 30% of the staff. A former SuperNatural employee, whose company was working on a 2K-published spiritual successor to SSX before 2K pulled out, noted that the studio had been paying for a large downtown Vancouver office that was only used by a very small handful of the company’s 100% remote workforce. A former Riot Games employee expressed frustration that layoffs were management’s answer to a need to save money, rather than corporate paycuts or reduction of unnecessary benefits, such as the office’s “luxurious cafeteria” and a “boba bar” in one of the company’s newer offices.

But while executives were spending money on big investments or unnecessary office perks, other developers I spoke to say leaders were cutting costs on actual game development. Former 343 employees tell me the Halo studio has been increasingly turning to outsourcing and co-development despite Xbox promises that 343 would remain “the home of Halo.” And multiple Bungie staffers reiterated stories I’d heard late last year of the company laying off a number of QA and other employees only to outsource their roles to cheaper, third-party companies.

“It was cheaper to export my work to a third party than it was to maintain my hourly rate and benefits,” said one former Bungie tester. “Before I was laid off, I was told to automate my work so that anyone could do the job without prior knowledge and so I put myself out of a job. Now they can give some random person the documentation I wrote and the scripts I created to do my job.”

But even some of the developers doing that outsourcing and co-development work are struggling. One developer told me they were affected by layoffs taking place at the UK division of development support company Pole to Win (PTW), having been told that these and other spending cuts were in part due to “less demand for PTW’s services and fewer projects due to the situation in the games industry.” According to them, work is being actively shifted to countries where labor is cheaper, and quality work is actively being sacrificed for speed and cost-efficacy. “I can’t wholly blame PTW on the layoffs,” they said. “It seems the industry at large is unwilling to pay for quality and wants to maximize profit instead even if it results in a worse product.”

A lack of willingness to risk large amounts of money on quality game development is a problem even outside of large studios. We heard from a number of developers who lost jobs due to a recent, drastic trend that sees gaming startup investment drying up across the board. One developer, laid off from a very small indie studio funded by a non-profit, told me they “foolishly thought we’d somehow be more stable and they’d be more ethical.” They recalled being told by leaders that because the company were funded by a nonprofit investing in the “‘thinky’ genre space,” it was able to take risks on games that might not recoup. But in the end, that proved not to be true – the funding source chose to tighten its belt, and several people lost their jobs.

Others we spoke to cited Embracer Group’s investment promises falling through in particular as a reason they were laid off, either because Embracer was supporting their project or because it had acquired their studio and then made drastic workforce cuts when a multi-billion-dollar Saudi investment deal fell through. But a few also noted that while Embracer’s sudden money problems were largely its own fault, outside studios that lost Embracer Group funding had nowhere else to turn. Projects, especially smaller ones led by marginalized developers, just aren’t getting money right now. No money means no jobs. And given that games aren’t showing any signs of getting less expensive to make, that trend seems poised to continue for months or even years to come.

Shorter Games With Worse Graphics

Yet even when studios are funded, supported, and get their games out the door, mass layoffs are still happening. One other key reason given by the developers we spoke to is sad, simple, and hard to foresee: often, projects just don’t sell well enough. Take Relic Entertainment, which last May laid off nearly half of its developers after Company of Heroes 3 launched to good, but not great reviews. One laid off developer told us this was due to a confluence of factors: Company of Heroes 3 had taken longer to develop than expected; Relic hadn’t had a real grand slam hit game in years, and the company moved to a bigger, more expensive office in Vancouver mere months before the pandemic hit.

“What’s been so hard about Relic’s layoffs over everything I’ve watched shortly before and since is that I understand the Relic layoffs,” they said. “At my most dispassionate and composed, I’d say our layoffs weren’t part of a broader trend. We were the noise amongst a clear signal: a company that was reckoning with nearly a decade of missed bets at the latest possible moment before even more drastic, maybe studio ending, change would have come. I can’t begin to document the sheer volume of 50/50 bets that Relic management made with Company of Heroes 3 that ultimately all went bad.”

Our layoffs weren’t part of a broader trend. We were the noise amongst a clear signal.

Relic Entertainment is far from alone. Game development is becoming more expensive by the year. It’s also taking longer, which means more money must be allocated for competitive salaries and benefits. AAA games especially often require hundreds, or even thousands of people, studio spaces, tech for every employee to work on, and countless other costs. As a result, the financial risk inherent in making any big game over several years is incredibly high, and climbing higher. But even after spending years and millions of dollars working on a game you expect to pay for itself and then some, there are no guarantees. In fact, it seems like the number of games that are able to justify their massive costs is on the decline.

And sometimes, a game can fail even when every internal indication suggests it should succeed, which brings us back to Ascendant Studios and Immortals of Aveum:

“At a high level, Immortals was massively overscoped for a studio’s debut project,” one former employee said. “The development cost was around $85 million, and I think EA kicked in $40 million for marketing and distribution. Sure, there was some serious talent on the development team, but trying to make a AAA single-player shooter in today’s market was a truly awful idea, especially since it was a new IP that was also trying to leverage Unreal Engine 5. What ended up launching was a bloated, repetitive campaign that was far too long.”

Another employee, still at Ascendant, expressed a similar sentiment, referencing a common games industry meme. “I want shorter games with worse graphics…and I’m not kidding.” According to them, Immortals of Aveum fit that bill. “It’s not a sequel or a remake, it doesn’t take 400 hours to beat, has zero microtransactions, no pointless open world grinding. Although not everyone loved it, it reviewed pretty well, currently sitting at a 74 on Open Critic and a Mostly Positive on Steam. No one bought it.”

The studio was composed of a number of industry veterans, they continued, and was predicted to do well by multiple publishers. But sales were only a “tiny fraction” of what was projected. And because of that failure, nearly 50 people lost their jobs. Our source pointed out that when layoffs happen, a common refrain on social media is that greedy CEOs should take paycuts, or that employees should unionize. And while they said both suggestions are often good ones generally, neither can guarantee every job will be saved. Ascendant’s CEO’s salary, they said, wasn’t big enough to have made a difference if cut. And while a union could have improved severance or even saved some jobs, it would not have helped Immortals of Aveum sell more copies.

“There’s plenty of layoffs due to gross mismanagement and greed (looking at you Embracer), but there’s also plenty that happen because this is a stupidly volatile market that requires mountains of capital to participate in at a professional studio level. For all the things Ascendant did right (paying people well, an entirely remote studio, little overtime until the end, chill environment with lots of freedom to grow, respecting QA, hiring juniors, etc.), it did not work out.”

Of course, many games have red flags flying about their eventual underperformance well before launch. Nevertheless, publisher deadlines, funding limitations, and other factors can lead to studios pushing games out the door to cut their losses. But those games are releasing into a market that is becoming increasingly unforgiving for games that are simply “fine.” And when those imperfect, merely adequate games fail, developers inevitably lose their jobs.

Aftershocks

So why is the games industry undergoing a trend of mass layoffs that seems poised to span at least two years, maybe longer? Why are projects and entire studios being shut down en masse, why is funding drying up, and why do so many developers feel their only stable career option is to exit the industry entirely? According to the people impacted, there’s no simple answer. The pandemic was a single catalyst, not a cause.

But there is a common theme in all this: making games is riskier and more expensive than ever. Development also increasingly depends on the decisions of outside investors and shareholders with big money to spend, rather than those whose livelihoods are tied to the work. If those investors take their money elsewhere, games don’t get made. Analysts say the industry will rally soon, and perhaps it will. But as many developers I spoke to lamented, how many people will have their lives upended or leave the industry altogether before that happens?

“I’ve been in the industry for 15 years and I’ve never seen things this bad,” said one developer who was laid off from Drifter Entertainment last year. “Everyone is scared and waiting to see if their studio is going to be next. I am worried that this year is going to cause real, permanent damage and scarring to the game devs affected, and it’s not going to be good. The aftershocks of this are going to resonate for the foreseeable future. Games are ultimately a labor of love and creativity, and a demoralized workforce is not going to be at its best.”

Rebekah Valentine is a senior reporter for IGN. Got a story tip? Send it to [email protected].

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