What a shame, Embracer really seemed like they would bring about a new age of games with free radical and all, but since the 2 billion fell through they are dismantling everything to stay afloat, I’m now afraid we will never get that Deus Ex Mankind Divided sequel.
In what way did a hyper-conglomerate buying up every studio they could for their own profit seem to indicate it would usher in “a new age of games”? It was always going to end like this.
But every single corporation ever says that when they vertically and horizontally integrate their operations, it streamlines workflows and brings quality and savings to customers.
Customers always see that quality and saving, right? That always happens when monopolies form, right?
Games companies expanded like crazy due to low interest rates and high demand for games during the pandemic. Now interest rates are going up and people go outside again.
In this case, and for a lot of other studios, Embracer went on a buying spree some time ago, betting that a deal worth $2 billion with Saudis would go through. It didn’t, and now they are forcing cost cuts across all studios they own.
You've got some good answers already, but I can expand on it a little: businesses in most sectors are feeling the impact of increased interest rates - both because they can't borrow as much themselves any more, and because there is less money coming in from investors because they can't borrow as much either - but tech (including games) is doubly impacted because there was such a surge in demand during lockdowns. While other businesses tended to struggle during lockdowns, and have simply had that struggle replaced with a different struggle due to the interest rates, the tech sector grew massively during the pandemic.
People working at home, or furloughed, had more personal time and more disposable income because they weren't spending money on travelling to work, on overpriced lunches, on dining out with friends, going to concerts, etc. It all added up, and they spent that money on streaming subscriptions, video games and just generally on recreational, home-based activities, many of which revolve around tech these days. So the tech sector grew a lot because of the low interest rates, and it grew a lot because more people were buying its products/services. And now, rather than having more disposable income, a lot of people are facing a cost of living crisis, meaning not only have they reduced their spending because they're back in the office and dining out and going to concerts again (and all those other things people spend money on when they're not confined to their house), but many people have less money to spend on gaming, subscriptions, etc, than pre-pandemic.
Also, because the tech sector was doing so well during the pandemic, it was an attractive prospect for investors (who themselves had increased money, as well as great interest rates), meaning it grew even more. Everything kind of fed into each other and the tech sector grew exponentially as a result. Whereas right now, not only does the increased interest rate for borrowing mean investors are throwing their cash around less in general, but the fact that the tech sector is struggling makes it a less attractive prospect for investors, meaning the whole sector kind of doubly loses out on that front.
So these tech companies invested their money into growing their companies and expanding their businesses' scopes like good capitalists. Which does generally make sense - if you find yourself sat on a huge pile of money, it's generally better to find a way to invest it into something useful (or to invest it into something makes you an even bigger pile of money if you see the Monopoly Man as aspirational). The issue is, most of them were somewhat short-sighted (plus global economics is a tricky thing to predict); they spent money as if it was always going to be coming in at the same rate. And now that they're being impacted by increased interest rates on their own borrowing, the loss of investors, and the reduced spending power of consumers and they're very suddenly having to make massive cuts to stay afloat.
I think the other thing you need to highlight is that during that rapid growth phase 2 years ago it meant building up teams. In tech it really became an job market where employees had lot of the power in negotiation which drove up the cost of labor to fill this surplus of openings. I worked at a company where team members were being offered 10k to 25k annual retention bonuses to not quit (if you want quit within a certain time you pay it back, but if you quit hopefully your new employer spots you a signing bonus to cover it). But with all of the factors you mentioned in this cool down, you end up with a problem that you now have too much staff, but also too expensive staff that you can’t afford. Employees are definitely losing now with the layoffs, but for the ones that were able to make job moves and survive the layoffs, they’re probably are doing much better because of it (at least from a compensation POV, not sure about anxiety worrying about being laid off next).
For the people that don't want to read the article, this seems especially relevant:
But much has changed since 2022: Embracer, which owns Gearbox, bet the house on a $2 billion deal with a Saudi investment group that fell through in 2023. Ever since, its many, many properties have been hit by layoffs on a near-monthly basis.
I don’t think blaming capitalism is a complete answer, here - the functioning company in step one was capitalist. There was, at that point, a group of people making stuff to sell for profit, and it was working okay. (Should’ve been unionized a decade ago, and management probably committed criminal skeezery, but the company did function.) There’s nothing fundamentally impossible or self-contradictory about expecting the part where people do stuff for money to keep doing the thing it’s for. On some level, this is people being bad at capitalism.
Yep, Embracer bought a LOT of studios expecting this deal to work out, and then it didn’t, so many of those studios are now effectively as good as dead in the water or on their way there. It amazes me how so many people and companies always forget the basic financial idea of “don’t spend money you don’t have”.
So I assume the leadership, which gets paid the big bucks due to their decisions making much larger impacts on the company, will take responsibility for the action and will be fired due to their salary being based on the level of personal responsibility to their company’s success/failure.
Oh wait, no. Once again we wipe out the bottom rung workforce, expect the remaining employees to do twice the work with no extra pay in the face of increasing cost of housing and living, meanwhile their professional gambler CEO either gets off scott free or snags a golden parachute on the way out the door to their next job.
Firing the people that do the work to make the company money is just good business! They're a dime a dozen, just hire another 2 managers and a couple marketing execs and soon you'll be printing money! /s [these companies are freaking dumb]
It's crazy what you can get away with when you have some money and no sense!
As someone who always thought about getting into gaming as a career, i’m so glad i didn’t… it’s a shame that game developers are having to suffer through such a toxic industry, and that there aren’t more protections in place for these people that create the amazing experiences that we all love so much.
I hope that they are able to find new and better places of employment.
That’s simply not true, projects are usually done in stages. You got pre-production, production, testing, launch, post-production, …
So take an employee who mainly works in pre-production. Based on what you said they’d be laid off after everything is done and production starts, right? But that’s not how it works. Those people immediately start with the pre-production work of either the next project, or the DLCs for the current one.
There’s always more to do, after launch of a game you can’t have your developers sit around idle, you need the next project already prepared and ready to go. That’s why game DLCs sometimes release only months after launch, they have been worked on for a while.
What has that to do with this argument? The lay-offs in the last six months were mostly due to massive overhiring while money lending was cheap. Now interest rates are up and those companies are trying to keep their profits up (or become profitable in the first place).
And the thing is: They hired so many people, even with the lay-offs the headcount is still higher than it was a few years ago.
Sorry you’re getting downvoted for being correct. I went to school for game design and decided to change career paths when I found out everything is contract work. Once a game is finished, you’re out of a job and need to search for another studio to work for.
If it was all contract work it'd be better, probably. Devs would have representation, like actors or film directors, and they'd sign up for a project at a premium in the understanding that they're getting paid for the downtime after the project ends.
The kinda shitty part is that everybody is a full time employee but you still get frequent layoffs after projects end. That's the worst of both worlds, especially in the US where there are basically zero mandatory protections. In places with actual labor regulations it's... kinda expensive and self-defeating.
It is true that the layoffs get reported but the hires do not, so a lot of devs get rehired fairly quickly or start new projects and studios, so it always seems like there are devs getting kicked to the curb when there's a baseline of churn and cycling. That said, 2023 has been a very, very, very shitty year for the games industry for a number of reasons. Which sucks, because it's been a great year for games themselves.
The kinda shitty part is that everybody is a full time employee but you still get frequent layoffs after projects end. That’s the worst of both worlds, especially in the US where there are basically zero mandatory protections. In places with actual labor regulations it’s… kinda expensive and self-defeating.
Something like 60% of EA employees live outside the U.S.A.
Unions. If we want to stop the suffering of exploited game developers while the gaming industry rakes in more money than the movie- and music industry combined, we should push hard for unions to protect the well being on creative potential of these workers. Idgaf if EA loses 10-25 million a year to additional wages. That money belongs to the workers in the first place.
It’s probably significantly more than 10-25 million a year in additional wages given the quality of employees, but it’s still likely pocket change next to things like the marketing budget. I work in a more capital intensive industry (tooling, hard parts, etc), but we still spend a few billion on engineering. Know what else we spend a few billion on? Marketing, amoung many other things. Job cuts always make me chuckle because they’re a, “we’re doing something” but we spend orders of magnitude more on material, facilities, etc.
According to a quick search engine query, EA had 13500 employees as of 2023. He's proposing a $50-150 monthly pay rise, which is... not much of an upgrade.
And what was the board's compensation in comparison? No, making games costs what it costs. What is expensive is the marketing stupidity and the corruption and self serving in upper management.
Both of those things can be true at once. I don't know how much the marketing is "stupidity", ideally marketing makes you money. Execs being overpaid is absoutely a thing.
But even if you took those out games would be very expensive to make. When you have hundreds of people working on something for years numbers start to get very high. Scale is a bitch.
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