Gaming Industry Layoffs: Startups Turn Challenges into Opportunities

SEO Manager at RetroStyle Games | Feb 2, 2024

The gaming industry is currently going through a tough phase with many layoffs, but this is also creating chances for startups.

These new companies are using this situation to their advantage by hiring talented people who have lost their jobs. This is giving startups a boost, helping them grow and bring new ideas to the gaming world.

It’s a time of change, where small, flexible companies are finding ways to succeed even in difficult times.

Recent Layoffs in Gaming

What happened to gaming? The gaming industry has experienced significant layoffs in recent years, affecting various companies and thousands of employees.

The year of 2023 in gaming alone, laid off 9,000 game development professionals.
This trend continued into 2024, with over 3,000 developers laid off in the early part of the year.

Several major companies have made notable reductions.

For example, Unity planned to lay off a portion of its workforce and reduce office space as part of an optimization effort aimed at improving revenue situations. This was the third wave of layoffs at Unity within a year.

Riot Games announced layoffs affecting about 11% of its workforce, primarily those not directly involved in development.

Microsoft also made significant cuts, particularly in its gaming divisions like Xbox and Bethesda.

Similarly, Amazon reduced its workforce in its gaming divisions, and Epic Games laid off nearly 900 employees, including all developers of the game “Fall Guys“.

The reasons behind these game layoffs are multifaceted. Economic downturns and the need for companies to cut staff that had significantly expanded during the COVID-19 pandemic are among the primary causes.

Companies like Unity reassessed their priorities, leading to the cessation of several projects and the consequent reduction in staff.

The layoffs in the gaming industry reflect a broader trend of economic challenges and restructuring within the tech sector. Despite the growing popularity and revenue of the gaming industry, these layoffs indicate a phase of adjustment and recalibration for many companies.

As experienced professionals find themselves seeking new opportunities, there’s a surge in independent game development and the creation of small studios. This shift is leading to a more diverse gaming ecosystem with fresh ideas and game concepts (along with new character’s concept art).

Moreover, the rise of remote work culture in the gaming industry has made it easier for laid-off professionals to collaborate internationally, potentially leading to unique and varied game development projects.

This trend is also encouraging a stronger freelance market within the gaming industry, where skilled individuals offer their expertise on a project basis.

Lastly, the industry’s focus is slowly shifting towards emerging technologies like virtual and augmented reality, requiring new skill sets and potentially opening up job opportunities in these areas.
This could lead to a redefinition of job roles and the emergence of new career paths in the gaming industry.

The Opportunity Landscape for Gaming Startups

Video game current events, while challenging for those affected, have created an opportunity for gaming startups. This situation, coupled with the continuous growth and evolution of the gaming sector, presents a fertile ground for innovation and new business ventures.

1.) The layoffs have led to a surge in available talent

Experienced professionals from established companies bring with them a wealth of knowledge, skills, and industry insights.

Startups can capitalize on this by recruiting these individuals, thereby strengthening their teams with seasoned experts.

2.) The gaming industry CONTINUES to grow

With new technologies like AR, VR, and blockchain opening up fresh avenues for exploration. This growing market demand provides an excellent opportunity for startups to introduce innovative products and services that address unmet needs or improve upon existing solutions.

3.) Gaming sector has consistently attracted interest from investors

With the industry showing resilience and potential for high returns, venture capitalists and angel investors are often on the lookout for promising gaming startups.

The current situation might lead to more focused investments in innovative and sustainable gaming models.

4.) Quick progress in technology

Rapid advancements in technology provide startups with tools and platforms to develop cutting-edge games or gaming-related services.

The availability of powerful game development engines, cloud computing, AI, and machine learning technologies offers startups a chance to create unique gaming experiences.

5.) The gaming audience is diverse and continually evolving

There is an increasing demand for new genres, inclusive and accessible games, and different forms of gaming like mobile and social gaming.

Startups can tap into these niche markets and cater to specific audience segments.

6.) Collaborative spirit

The gaming industry is known for its collaborative spirit.

Startups have the opportunity to partner with other companies, including tech firms, publishers, and even non-gaming businesses, to co-create and innovate.

7.) Gaming is a GLOBAL TREND

Gaming is a global phenomenon, and startups can reach a worldwide audience with relative ease, thanks to digital distribution platforms.

This global reach allows startups to test their products in various markets and scale quickly if successful.

Leverage the Talent Available in Outsourcing Companies

Working with outsourcing companies is a smart move. It allows startups to use outside expertise to tackle challenges and stay competitive.

This way, startups can focus on what they do best, while the outsourced team handles specialized tasks. It’s a practical, efficient way to grow and innovate in the gaming industry. Need more particular reasons?

Hiring game art outsourcing studios is cheaper and good for startups with small budgets.
The workflow of game art outsourcing studio is more personal: they first understand what the startup needs, then create and improve the game art. This way, startups get quality game art without spending too much.
Startups can change the size of their team based on their project needs.
This flexibility is really important in the fast-moving gaming industry.
Outsourcing companies have people with unique skills.
This can help startups add cool features to their games that they might not be able to do on their own. Using the example of animations in our game Ultra Pro Wrestling Project, it can confidently be said that game animation outsourcing can bring dynamic and engaging visuals to the game, enhancing the overall player experience.
Startups can focus on the big picture like coming up with game ideas and growing their business.
This focus is important for startups to differentiate themselves in the market and create a unique value proposition. Tasks like game character design can be managed by outsource experts, making sure to keep high-quality and appealing characters in the game.
Outsourcing reduces the chance of things going wrong, especially in areas where the startup might not be very experienced.
Trusting things like game environment design to outsource companies can ensure that nothing will go wrong and all the tasks will be executed in due time.
Outsourcing companies work with clients from all over the world.
They can give startups tips about different markets and trends.

With help from outsourcing teams, startups can get things done quicker.

This is super important to stay ahead in the gaming market.

Outsourcing 3D game art outsourcing or 2D game art outsourcing can significantly speed up the development process.

Gaming startups stand to gain significantly by tapping into the resources and expertise of outsourcing companies. This strategy not only provides practical solutions to resource and skill constraints but also opens up avenues for innovation and growth.

By effectively using outsourced talent, startups can indeed turn challenges into opportunities, positioning themselves strongly in the global gaming market.

Contrast with Traditional Models

Using outsourcing in gaming startups is very different from how big gaming companies work, and it can be better for startups.
Why so?

Startups can change things quickly with outsourcing. Big companies often move slowly because they’re bigger and have more rules.

Outsourcing gives startups access to people who are really good at specific things, like making game animations.
Big companies usually have general teams who do a bit of everything.

Startups save money with outsourcing. They don’t have to spend as much on big offices or don’t pay cut lots of employees all the time, like large companies.

Startups can hire more people or fewer people easily with outsourcing. This is harder for big companies because they have a fixed number of employees.

Startups often try new and risky ideas, which can lead to cool, new games. Big companies might stick to what they know works and don’t try new things as much.

Outsourcing lets startups work with talented people from different countries. Big companies usually hire people who live nearby.

Startups can make unique games for specific types of players by working with outsourcing experts. Big companies often make games for a very broad audience.

So, for startups in gaming, using outsourcing can be a smart move.
It helps them be flexible, save money, and come up with fresh ideas.

Game Industry Layoffs Cycles

Every sector undergoes cycles of expansion and retraction, and what we're seeing looks to be a post-COVID realignment. As we know, during the pandemic there was a huge surge in games and this sudden boom led to studios scaling up swiftly, making acquisitions, and perhaps some over-investment in certain areas. Now some studios need to readjust. But it's worth noting that while certain studios are facing challenges, there are many others that are expanding.

The concept of Game Industry Layoffs Cycle is a compelling way to understand the ups and downs of the gaming industry, especially when considering the experiences of various prominent companies such as Niantic Labs, CD Projekt, Riot Games, Epic Games, and Kabam.

Starting with Niantic Labs, known for creating the augmented reality game Pokémon GO, we see a classic example of these cycles. Originally a startup within Google, Niantic faced significant challenges during Google’s restructuring, leading to layoffs. Despite these setbacks, the company bounced back with Pokémon GO.

However, in 2023, Niantic experienced another round of biggest layoffs, laying off around 230 employees and canceling projects, demonstrating the cyclical nature of the industry.

The discussion around Nintendo and layoffs highlights the company’s unique approach in the industry, particularly under the leadership of its former CEO, Satoru Iwata.

During financially challenging times, such as with the 3DS system’s dismal sales in 2011 and the Wii U console’s struggles in 2012 and 2013, Iwata famously took a significant pay cut rather than laying off employees.

He believed that maintaining employee morale and long-term sustainability was more important than short-term financial gains. This concept stands in stark contrast to the current wave of layoffs affecting many companies in the gaming industry, sparking discussions about corporate ethics and the treatment of employees in the industry.

CD Projekt, the developer behind The Witcher and Cyberpunk 2077, also experienced similar cycles.
The company underwent significant organizational changes in 2023, leading to a series of three rounds of layoffs throughout the year. This affected various aspects of the company’s operations.

In response, developers at CD Projekt Red formed a union, reflecting a growing trend of unionization in the gaming industry as a response to these cyclical industry layoffs. In the early 2000s, CD Projekt faced financial troubles and layoffs, but turned things around with the success of The Witcher series and later Cyberpunk 2077.

Riot Games, creator of League of Legends, faced layoffs in 2012 but continued to support and expand its flagship game. Over the years, Riot Games entered new markets and diversified its portfolio, showcasing resilience in the face of challenges.

Epic Games, known for Fortnite, has undergone significant changes and layoffs in the past. The company recently confirmed layoffs affecting around 830 employees, which is about 16% of its workforce.

These layoffs were primarily in teams outside of core development. The decision for layoffs was influenced by the company’s financial situation, as they were spending more than they were earning.
This was partly due to the shift towards a creator-driven revenue model in Fortnite, which has lower margins compared to previous times. The layoffs are part of Epic’s strategy to stabilize its finances, and affected employees will receive severance packages, including six months of base pay and healthcare, among other benefits. Epic Games plans to continue focusing on key projects and services, including Fortnite and Unreal Engine development

Kabam, a mobile game development company, faced layoffs in 2015 as it shifted focus from traditional mobile games to free-to-play games with in-app purchases.

This strategy led to success with games like Marvel Contest of Champions, establishing Kabam as a major player in the mobile gaming market. In 2023, Kabam, laid off 12% of its workforce. This decision was part of a strategic shift to refocus the company’s efforts on upcoming projects and streamline operations. Despite the success of some of their titles, these changes reflect the dynamic and often challenging environment of the mobile gaming industry. This move highlights the ongoing adjustments companies like Kabam make to stay competitive and adapt to changing market demands.

These examples highlight a common trend in the gaming industry, where companies often expand rapidly in response to success or favorable market conditions, only to face setbacks leading to downsizing.

The pace of growth for the games industry has peaked. It will keep growing, but mostly driven by increasing population and better internet connectivity, rather than by strengthening fundamentals of the business

Game Industry Layoff Insights

The game industry has seen a significant number of layoffs in recent years.

In 2023, an estimated total of 10,500 game industry workers lost their jobs. As of January 2024, the total number of layoffs has already reached over half of 2023’s total, with at least 5,670 layoffs reported.

This includes massive layoffs from companies like Microsoft, which laid off around 1,900 employees from its gaming division, and Riot Games, which confirmed layoffs of about 530 staff members. These figures illustrate the turbulent nature of the gaming industry and the challenges it faces in terms of job security and market stability.

The recent layoffs in the gaming industry are part of a bigger shift. As gaming technology and player interests change, companies are changing their strategies and workforces. Many laid-off professionals are starting their own independent game projects, leading to more diverse games. These layoffs highlight the need for more stable jobs and better management in the gaming industry. This could lead to new ways of making and selling games, changing the industry’s future.

(statistics taken from https://www.videogameschronicle.com/news/over-5000-games-industry-workers-have-already-lost-their-jobs-in-2024/ )

Gaming Studios Lays Off its QAs

A survey by the Game Developers Conference (GDC) revealed that 35% of developers were impacted by layoffs within a 12-month period.

This included 7% who were personally laid off, 17% who had colleagues in their department laid off, and 11% who saw layoffs in other teams or departments. The survey highlights the challenging environment in the gaming industry, particularly for those in Quality Assurance (QA) roles, which are often affected during these layoffs.

The GDC survey’s findings point towards a broader impact on the gaming industry. Beyond the immediate job losses, these layoffs affect morale and can lead to a shift in industry dynamics. This study also highlights the importance of adaptability and skill development for professionals in the gaming sector.

As roles like Quality Assurance face challenges, there’s an increasing need for professionals to diversify their skills and adapt to new technologies and market demands. This environment could also encourage a rise in freelance and contract work, offering flexibility but also unpredictability in career paths.

How about Gaming Marketing?

The situation on the market is tense. The recent surge in layoffs across the gaming industry can be attributed to various factors. Many studios have cited economic challenges as the primary reason for downsizing. Some executives point to specific causes such as declining player numbers for certain games or underwhelming sales figures.

For example, Ascendant Studios had to let go of half its staff shortly after the release of Immortals of Aveum due to poor sales.

Epic Games, with a significant reduction of 800 employees, highlighted excessive spending as a contributing factor. As a result, thousands of game developers have found themselves jobless, creating a highly competitive job market with many skilled professionals seeking new opportunities.

This is why you need to make sure that you stay up to date with news and know how to survive in the current market. Gaming marketing, particularly through social media and soft launches, is important for the success of video games. Social media marketing for video games involves using platforms like Twitter, Facebook, Instagram, and others to build communities, engage players, and create buzz around games.

Key strategies include using eye-catching visuals, interactive content, and influencer collaborations.
A soft launch, on the other hand, is a strategy where a game is released to a limited audience before the full launch. This allows developers to gather data, refine gameplay, and improve marketing strategies based on user feedback. Both these approaches are integral to modern game marketing, helping to ensure a game’s success upon its full release.

Future Outlook

The future outlook of the gaming startups in the gaming industry is quite promising, especially considering the 24% year-over-year growth of indie projects in our studio.

This growth can be largely attributed to the increasing number of professionals being laid off and subsequently starting their own indie game projects. With a wealth of talented specialists now ‘on the street,’ there’s a great opportunity for them to innovate and create in the gaming space. Our studio is eager to support these ventures.

AI game art and game porting companies are two key areas to highlight in this evolving landscape.

AI game technology is revolutionizing the way graphics and visuals are created, offering efficiency and creative possibilities. Game porting companies play a crucial role in adapting games for different platforms, expanding the reach and accessibility of these new indie projects. With a focus on supporting the evolving community of independent game developers, the current climate is ripe for innovation and growth.

So if you get cut, you’re still an expert. We bet you’ve already started making another great game with other people like you. Write to us – we’d be happy to speed up/improve/polish the release.