Game On: Epic Games’ CEO announces layoffs of 16% of its workforce
On Sept. 28, Epic CEO Tim Sweeney sent out a company-wide email announcing that 16% of Epic employees are being laid off – about 830 workers. He further specified that two-thirds of the layoffs were in teams outside of core development, and that 250 people are leaving Epic through “divestitures from Bandcamp and SuperAwesome.”
For those unfamiliar, Epic has secured an impressive slice of the video game pie in recent years, owning and operating franchises like Fortnite, Rocket League and Fall Guys: Ultimate Knockout. Additionally, they’re responsible for prominent game engine Unreal Engine, Steam’s primary competitor Epic Games Store and a host of other gaming-adjacent endeavors.
Given Epic has been incredibly successful since Fortnite’s battle royale mode took the world by storm in 2017, the layoffs come as a big surprise. Sweeney specified that “we’ve been spending way more money than we earn, investing in the next evolution of Epic and growing Fortnite as a metaverse-inspired ecosystem for creators.”
He continues, “Epic folks around the world have been making ongoing efforts to reduce costs, including moving to net zero hiring and cutting operating spend on things like marketing and events. But we still ended up far short of financial sustainability. We concluded that layoffs are the only way.”
The only consolation is that the laid-off employees are walking away with impressive severance packages that include six months base pay, six months of paid health care and various stock options and 401K bonuses. Game developers aren’t always fortunate enough to be offered severance packages.
Aggressive over-expansion followed by rapid downsizing seems to be commonplace in the video game industry lately, with this news coming just three months after Embracer Group announced plans to close studios, cancel games and lay off staff in the wake of a $2 billion contract deal with the Saudi Arabian government falling through. Embracer conducted layoffs at studios Gearbox, Crystal Dynamics and Beamdog and shut down Campfire Cabal and Volition, the latter of which was famous for its Saints Row franchise.
While gig work is always particularly susceptible to such trends, I believe the damage could be mitigated significantly if it weren’t for rampant greed, uninformed speculation and irresponsible business practices. Corporate stooges everywhere seem convinced that the metaverse and metaverse-adjacent VR endeavors are the future, even after Meta – the parent company of Facebook, Instagram and WhatsApp – laid off some 10,000 jobs earlier this year.
To know that hundreds of former Epic Games employees are suffering the same fate from the same gambit is infuriating. It’s not as if their well has run dry – while they haven’t revealed a solid statistic for their earnings in 2022, Fortnite alone netted the company $5.4 billion in 2018, $3.7 billion in 2019, $5.1 billion in 2020 and $5.8 billion in 2021. While the game’s active player count has dropped off slightly, according to ActivePlayer.io it drew 223 million players in the past month – incredible by any metric.
I can understand Epic Games’ reluctance to rest on its laurels, but it’s difficult to imagine how any company could so severely mismanage Fortnite’s revenue stream, which requires remarkably little upkeep. I’m convinced the average preteen Fortnite enthusiast could run the company more responsibly than its executives, who are probably too preoccupied with managing their offshore bank accounts and figuring out where to dock their latest superyachts.
For being a gig-based industry, the video game economy is remarkably stable and profitable. While the market shrank 5% in 2022 – the pandemic’s quarantine orders momentarily boosted game revenue – the market total hit $183 billion in 2022, according to Newzoo. It’s projected to grow at a compound annual growth rate of 13.4% from 2023 to 2030.
Despite excellent cashflow and exciting new technologies, 2023 has been an especially tough year for game developers between the layoffs at Meta, Embracer Group and Epic Games and the predatory pricing model announced last month by Unity Technologies for its Unity game engine, which is popular with indie studios. For all its apparent whimsy, game development is a rough-and-tumble business.
Riordan Zentler can be reached at riordanzentler@gmail.com.