Cognition Dissemination: The Video Game Industry Is Melting Down Even Harder

The most important video game story in the second half of 2023 was the sheer number of layoffs. It felt like we couldn’t go a week without news of at least two companies laying their employees off. These were led by Embracer Group, a company that massively and predictably overplayed their hand during the time when they were acquiring one development studio after another in the hopes that all of them would deliver massive profits in the future. But they were hardly alone.

There was hope that this would subside going into 2024, though that was always myopic. Once a trend of mass layoffs tends to start, they take far too much time to stop.

The trend for 2024 has sadly been the opposite: Layoffs are hitting harder and coming at a faster pace. A staggering number of over 5,000 people have lost their jobs, and therefore their livelihoods, since the start of this year. It’s only January.

The biggest in recent memory involved the layoffs from Microsoft’s Xbox division, announced only a couple of days ago as of this writing. The company confirmed that a mind-boggling 1,900 people will lose their jobs across the division. The newly-acquired development teams as part of Activision Blizzard are being hit the hardest, with every single team losing several individuals. Seniority was irrelevant here, as several important developers from their respective teams are losing their jobs. Let this be yet another reminder that corporate mergers and consolidation never benefit the common workers.

The biggest casualty was Blizzard’s unnamed survival game, which will most certainly never receive a title now that it’s been cancelled. Bloomberg reported that the game had been in development for an eye-popping six years now, and still needed a few years more thanks primarily to engine issues. This was clearly too tall a task for Microsoft to continue funding, and most of the project’s team is leaving the company as a result. The Overwatch 2 team also lost a bunch of employees despite the game still receiving constant updates, including the narrative director. Blizzard president Mike Ybarra is also confirmed to be leaving the company. Other subsidiaries like Toys for Bob, Sledgehammer Games, and High Moon Studios lost staffers too, meaning that not even Call of Duty development teams were spared.

It’s worth noting here that Communications Workers of America Union head Beth Allen confirmed that no members were impacted by the layoffs. This is perhaps (read: definitely) a sign to the remaining employees of the steps they should take posthaste.

Another potentially sobering anecdote is how the layoffs appear to have impacted the Xbox division that helps coordinate physical releases for Xbox Game Studios-published games. It could only be the latest sign that Microsoft plans to reduce their number of physical releases, if not abandon them entirely.

The worst of the layoffs came from Microsoft this week, but too many other companies have shed employees. On the same day that Microsoft announced their Xbox layoffs, Polish studio Reikon Games laid off most of their employees. The team last released Ruiner in 2017, and had recently been teasing their newest game. Riot Games also announced at the start of this week that 530 employees will be shown the door, an incident that feels like it was announced weeks ago thanks to the sheer volume of these announcements. The aforementioned Embracer Group almost needs a category of their own, with more studios they own like Black Forest Games and Lost Boys Interactive recently announcing job cuts.

I don’t think several communities realize just how bad this will be for video games overall. The silly people asking why they should care about any of this never will, those who claim they just want to focus on playing games. Who do these people think makes these games they like to play? It’s also not just AAA game studios suffering here, or “indie” companies mass purchased by larger companies (hello again, Embracer). Actual indie developers are suffering layoffs too. To say this is a bad moment is an understatement.

Worse, video game industry leaders say they’re gearing up for “up to two years of pain,” according to a company CEO who talked to GamesIndustry.biz on the condition of anonymity. It’s all thanks to a combination of “continued high interest rates, oversaturated video game stores and cautious investors,” according to the report. The same CEO suggested that 2024 could be the year of game studio closures, signaling how the pain will only become more intense as this year continues. Investors who talked to the publication also noted how many of them don’t see video games as worth the gamble any longer.

It feels like a bubble burst in the video game industry recently, but I’m having trouble pinpointing precisely what that bubble was, nor do I have a succinct name to call it. Someone cleverer than me will inevitably come up with one. This bad game industry comedown likely has much to do with how publishers green lit a bunch of titles after video game sales rose significantly during the COVID-19 pandemic, thanks to the increased number of people staying at home. They were perhaps hoping that crowd would stick around after the pandemic subsided (though hardly evaporated). Many among that audience have not, or are buying games in diminished numbers again, hence the current and future cutbacks. But don’t worry: The people at the top who ultimately made these decisions are certain to feel little-to-no pain from any of this, as always. The road will be rough from here.

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