Most video game workers will not forget the year 2023 in a hurry. It was the year that many video game workers saw their dream jobs swept from their feet. Andy Hirschfeld of Aljazeera called it “the year of layoffs”. A report by Challenger, Gray, and Christmas claimed there were around 20,000 layoffs in the media industry. Nearly the same amount was recorded in the video game industry. However, whenever I think about the reasons for the layoffs, it always revolves around the COVID-19 pandemic.
According to the World Health Organization, the true death toll from the COVID-19 pandemic might have been in excess of 3 million. While that is already sad enough, it also exposed the worst level of greed in many of us. From people fighting in the shopping mall for toiletries to some countries ramping up excess COVID-19 shots while others could not get a single dose.
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The worst may be behind us at the moment, but the ripple and global reset caused by the pandemic is something that we will have to live with—maybe until the next pandemic. I am sure by now you may be wondering what the COVID-19 pandemic had to do with the current wave of layoffs in the video game industry. Below are my theories to explain the correlation.
#1. The surge and slump in demand for digital content
As governments around the globe enforced social distancing and self-isolation to limit the spread of the pandemic, people around the globe turned to digital content to stay entertained and fight off depression and boredom.
Consequently, companies like Zoom and Netflix that created digital solutions boomed. The video game industry was not left out. To meet up with demand, companies hired more, leading to a bloated workforce. However, since the revenue was steadily flowing in, the size of the workforce was not a problem.
With the end of the pandemic and the return to outdoor activities, demand for digital content has dropped from what it was during the pandemic era. The large volume of games created during the pandemic era has also led to a glut that is hurting sales since multiple games are released every month or close to each other.
Games like Alone in the Dark and Banishers: Ghosts of New Eden had to be delayed until 2024 because of a crowded 2023 release window. In October 2023, for example, we saw a flurry of AAA titles churned out including Assassin’s Creed Mirage, Spider-Man 2, Super Mario Bros. Wonder, and Alan Wake 2 released.
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Naturally, some of the games released in 2023 would have performed better financially if the release window was not crowded. The boss of Ascendant Studios, the Immortals of Aveum maker, blamed the 40% layoff in the company on poor sales of their new IP.
It is really a no-brainer that studios depend on the sales they make from games to pay the wages of their staff as well as to make more games. If they are not getting enough revenue to meet up with their financial obligations, they are left with two options; layoff or close shop. Many studios will easily pick the former.
Many argue that the massive layoffs in 2023 is just the industry trying to correct itself after a brief period of overstaffing. But is that really true?
#2. The rise of artificial intelligence
Although research into artificial intelligence dates back to decades ago, it received increased interest and acceptance during and after the COVID-19 pandemic. Hell broke loose with the launch of ChatGPT in November 2022.
While it first started with writing, a flurry of other AI-based products that can do everything from text-to-speech to generate images from text prompts has hit the market. Heygen even helps people translate their videos to different languages while maintaining lipsync to make it feel like the person is speaking in that language.
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As AI suites and capabilities continue to evolve, many video game companies have become increasingly attracted to the idea of using AI to make games. Ubisoft even launched a Ghostwriter AI tool it claims will help writers speed up repetitive tasks.
Xbox recently partnered with Inworld AI to further explore the use of AI in the video game industry. While a vast majority of gamers have kicked against the use of AI in games, it has not stopped companies from experimenting. With the automation of more video game processes, the demand for human actors, artists, writers, and so on will continue to decline—as well as the increase in layoffs.
#3. COVID-19 exposed expendable roles
When the COVID-19 pandemic struck, many companies restructured their processes to remain in business. Some employees were allowed to work from home. Well, this restructuring also opened the eyes of many companies to how easily some roles can be eliminated without having a significant impact on the company.
When you take a look at the layoffs across some of the video game makers, those let go are usually non-developers. Core developers are usually retained to keep working on projects while roles like HR and social media managers are easily terminated.
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With surging inflation and a rise in the cost of making games, more video game companies are looking inward to find ways of cutting costs. For many, laying off employees is usually the first call. Sadly, it is often those at the bottom of the ladder who are barely surviving that take the heaviest blow.
Therefore, there is no better time to rethink your skills than now. If your skill can be automated, it is only a matter of time before an emotionless AI tool takes your place. Consider getting a new skill or expanding on your skill to stay relevant.
#4. Corporate greed
I mentioned earlier that the pandemic brought out the worst level of greed in some of us—and that greed is not limited to fighting for toilet paper. Whenever I talk about layoffs in the video game industry, one opinion that reverberates is corporate greed. So, how does corporate greed relate to the COVID-19 pandemic?
Well, during the pandemic, because of the increase in demand, many companies saw their monthly revenue rise by astronomical numbers. Now that the pandemic is over and demand has slowed down, company executives are still determined to retain the pandemic-era revenue levels.
For these executives, if they cannot increase revenue, laying off would be the next step to retain the generated revenue and ensure their net profit stands close to what it was during the pandemic era. According to an Aljazeera report, only a small number of CEOs have accepted pay cuts in the face of the massive layoffs across the tech industry. In fact, some are anticipating pay raises in the coming year.
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Zoom Communications CEO Eric Yuan was widely hailed for accepting to take a 98% pay cut amid layoffs. He took responsibility for overhiring. However, I am yet to hear that any executive in the video game industry took a pay cut in the current wave of layoffs.
In 2014, Nintendo made headlines when the top executives took temporary pay cuts following the disappointing performance of the Wii U games console. While President Satoru Iwata took a 50% pay cut, other executives took between 20% and 30% pay cuts.
Video game layoffs have led to increasing calls for unionization
The massive layoff that hit the video game industry has birthed different conversations. One of the leading discussions that has sprung up throughout 2023 has been around the need for video game workers to unionize. Many believe it is the only way of protecting talents from corporate greet and reckless hiring and firing.
Workers in some studios have already begun to heed that advice. Sometime in October, we reported that over 100 workers in Avalanche Studios had unionized and were renegotiating their contracts. Around the same time, we also reported that some developers at CD Projekt Red had also formed a union in collaboration with other Polish video game developers.
Unionization may be enough to fight layoffs in the video game industry relating to corporate greed. However, I doubt it would be enough to stop the layoffs linked to the increased adoption of AI. We have to realize that the COVID-19 pandemic has created a new world.
Instead of fighting to restore the old world, we should channel more of that energy into adapting to the new world. In Marvel’s Avengers, Thanos said, “Dread it, prepare for it, destiny still arrives”. Borrowing from those words, no matter the amount of opposition that may face the use of AI in the video game industry, it is simply inevitable.
That means those who make a living by creating NPCs for video games must reskill or join the layoff statistics over time. While most video game makers are advocating for the use of AI for creating NPCs, I have a hunch they will push it into creating core game elements and characters over time.
