What happens when a hit video game leads to layoffs
As the video game industry sees record profits and rising cultural relevance, the workers who create the games face a more volatile job market than ever. And many in the industry want a wake-up call.
Layoffs in gaming development are hitting a breaking point, even as video game adaptations like The Last of Us and Super Mario Bros. become major hits and sales hit a reported $195.6 billion last year, according to a State of Video Games report. One in three video game workers have lost their jobs in the last two years, and nearly half have still not found a new position, according to a GDC State of the Games Industry Report.
Experts say a perfect storm of high development costs, post-pandemic shifts in player retention, pre-existing toxic work environments and years of aggressive investment from private equity and venture capitalists have spurred instability, even for successful releases.
Why do video game studios cut jobs during record years?
Now, workers are unionizing. Last year, video game employees across the U.S. and Canada launched United Videogame Workers-CWA Local 9433, a union with the Communications Workers of America (CWA). It joins the global network of other unions such as Game Workers Unite, formed in 2018.
“The video game industry is one with many nightmare stories,” UWV-CWA’s president Auriela Augusta told Straight Arrow. “My personal philosophy is that I work to make sure no one else experiences that. I reflect on my admiration for video game developers to ensure they all have a good quality of life.”
Hostile work conditions have been well recorded across the industry: In 2021, the state of California sued Activision Blizzard for running a “toxic frat boy culture” for years due to its treatment of female employees.
Todd Yarbough, a video game video effects designer with more than 20 years of experience, told Straight Arrow he cannot even recommend students take a job in the industry.
“I’d like to believe that we’ll start seeing growth again soon, but I’m not sure at all at this point,” he said. “AI is looming on the horizon, and those same investors will see how cheap AI development can be, and think they’ve found the new gold rush.”
Augusta and Yarbough told SAN the industry is notorious for bad working conditions, including “crunch culture,” where developers can work 70 to 80 hours for weeks to finish a game before release. Yarbough said the added financial pressure from investors during the pandemic made game development longer, more precarious and pushed developers out of gaming to work in other fields.
“Crunch has always been a big problem in the game industry,” he said. “When you’re young, you can afford the physical tolls crunch can have on your mental and physical health. But studios are still expecting crunch, so it’s difficult to stand up for yourself and insist that you won’t crunch.”
How did pandemic investments change the video game market?
Over the past two decades, gaming has transformed from a console-driven business into a global, multi-platform ecosystem spanning mobile devices, PC and online services. But that growth has come with increasing risk, said Robin Boyar, a consultant and researcher with three decades of gaming industry experience.
As gaming became more accessible to new audiences during the pandemic, new investors made massive bets on gaming’s growth with venture capitalists investing $4.7 billion in video game startups in 2020. With people stuck at home, gaming hit new, unsustainable waves of popularity.
“After the pandemic, the big spike of people playing during the pandemic declined,” Boyar told Straight Arrow. “A lot of the investment from private equity and venture capitalists didn’t pay off.”
The first few weeks of the pandemic laid a foundation for a boom. The “cozy game,” Nintendo’s Animal Crossing: New Horizons sold 11 million in its first two weeks and 48 million copies overall. Call of Duty released its free-to-play Warzone mode that attained 30 million players in the first 10 days of release.
Microsoft — whose Xbox brand has struggled over the past decade in comparison to its main competitors Sony and Nintendo — made a bold gamble to close the hardware sales gap by purchasing video game publishing giants Bethesda and Activision Blizzard for a combined $80 billion.
It hasn’t paid off, as 9,000 workers last year alone lost their jobs after the record acquisition, and Xbox executives Phil Spencer and Sarah Bond stepped down in February amid declining sales.
What do developers suggest will improve job security?
Even when companies hit impressive figures, job security isn’t guaranteed. Epic Games, creators of the hugely popular Fortnite, has laid off 1,000 workers this year, despite the company’s $3.5 billion in annual revenue. Battlefield Studios laid off a number of workers after Battlefield 6 was the best selling game in the U.S. last year and after a whopping $400 million in development costs.
Boyar and Augusta both told Straight Arrow that companies overinvested during the pandemic and are scaling back to recoup their losses. Rather than venture into single-purchase releases, players are sticking to a few established, long-running “live service” free titles such as Fortnite, Roblox and Overwatch, reducing revenue for new releases.
As live-service games rake in massive profits, companies search for their own hit that will bring in a continuous revenue stream. According to Eurogamer, games such as Rockstar’s Grand Theft Auto Online bring in roughly $1.4 million per day to the company and nearly $500 million annually.
But Augusta said chasing these hits is unrealistic, and could lead to massive financial failures like Sony’s Concord, which reportedly cost $400 million to develop before its collapse. She compared the investments into these titles to similar Silicon Valley tech startups, where dozens can go bust, but one will be a massive hit despite the human cost.
“You’re risking seven to eight years of development time on games that can only succeed when they are world beaters. Not everything can be the Mona Lisa or the Sistine Chapel,” she said. “There’s a lot of money in games, but not a lot of smart money and people are feeling the consequences.”
Chrissy Fellmeth, an animator and union organizer with the International Alliance of Theatrical Stage Employees (IATSE), said video game workers are ready to combat the industry’s job instability.
“I’ve talked to workers who get blindsided by layoffs at AAA studios then they get nothing despite working for 10-plus years,” Fellmeth said. “When we talk about layoffs, it’s making sure they’ll be OK when they get laid off.”
Fellmeth said developers and animators both share similar career stability in terms of workers leaving studios after large projects, but game developers lack the job security.
As part of her new career, she is negotiating to guarantee severance pay and health insurance after contracts are completed or employees are laid off.
Though the experiences are difficult, Boyar and Augusta told SAN that improvements are possible. Boyar said smarter investment strategies, focusing on sustainable development and combating toxic workplace culture rather than chasing trends of live-service games could bring stability.
While Augusta feels there is a lot of tough work ahead, she looks to other media unions to inspire her to keep going.
“A big thing we want to do at the union is show that devs are people too, and we want games to come out well,” she said. “The current ecosystem doesn’t allow us to do our best work.”
Round out your reading
- Work for food: New SNAP rules reshaping who gets to eat.
- How Iranians actually feel about regime change and war.
- Feds warn that Russians may hack your internet router. Why?
- The truth behind a medical condition that never existed.
- We’re building a new Straight Arrow. Help us shape our future by taking our survey.
Ella Rae Greene, Editor In Chief
