Is the entire gaming industry collapsing?
It seems like I'm reading headlines similar to this one almost daily, as of late.
Western game dev certainly seems to be in a bad place. I think there are probably a few factors explaining what is happening now:
1: Overhiring during the pandemic. There was a lot of money flowing into tech during the earlier days of the pandemic, and companies were hiring and expanding like crazy. The economy settled, and now companies are laying people off left and right. Not even limited to game dev, as we saw this occur for Facebook, Twitter, Google, Microsoft, and pretty much everywhere else in tech.
2: The knock-on effect. When big developers start to lay off staff in bulk, other companies may be incentivized to copy that behavior. It's easier to justify firing a bunch of employees when everyone else is doing it, and then when you have a surplus of people in the market for a new job, you can selectively hire new talent for cheaper.
3: More attention in reporting. If it wasn't a trend, a studio laying off 30 employees might not otherwise be newsworthy. A lot of studios actually make it an unfortunate common practice to lay off their contractors/temps right at the end of dev cycles so that they don't get any sales bonuses. But there's a lot of layoffs happening, so even smaller ones are generating buzz, and with a lot of workers' rights/pro-union sentiments going around following the successful strikes in Hollywood and the automotive industry, people are starting to pay more attention when workers are being treated unfairly or being taken advantage of elsewhere.
Its also typical in game development, you dont need the 'full team' all the time, if your in preproduction you hardly need 100 programmers sitting around twiddling their thumbs
High interest rates make investing in risky projects like game development uninteresting. Why take risk if interest rates bring in high returns by themselves.
A lot of the games industry is backed by a constant flow of investment. Which has totally dried up. This company got 80 million in investment last year, this year can't find more to keep paying the bills. Same is true for most of the announcements.
Then there is large companies like Microsoft, those layoffs are purely about paying shareholders extea money.
Here's the same company boasting about record profits and revenue six months ago https://uk.marketscreener.com/quote/stock/DIGITAL-BROS-S-P-A-79337/news/Digital-Bros-in-9-months-sees-profit-and-revenues-on-the-rise-43821922/
Net financial position is negative EUR21 million from EUR15.2 million net of IFRS 16 and in line with expectations.
From your own article…
Ifrs 16 makes things complicated, I wouldn't pay attention to that part unless you are interested in the specifics of the companies financials. The point is that revenue and profit were up
I didn't realize SVB going kaput would have ramifications like this.
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