Gaming Layoffs Already Top 2023’s Total — and It’s Only July

The first quarter of 2024 saw a deluge of layoffs hit the video gaming industry after more than 10,000 global jobs were cut in 2023. 

Halfway through the year, and the damage done is dumbfounding. 

By the end of June, 2024’s global gaming layoffs had fully outpaced last year. Q1 did see heavier cuts at prominent companies including Microsoft-owned Activision Blizzard and Unity Software, which cut close to 2,000 roles each, followed by cuts in the high hundreds at Sony’s PlayStation, EA, Tencent-owned Riot Games and another 500 at Amazon subsidiary Twitch. 

But Q2 didn’t assuage the notion that these layoffs were the last pitfall to come after the publicly traded leaders of the industry finished sorting out their budgets for the year. The second quarter was marked by Take-Two Interactive slashing more than 600 roles in a third wave of layoffs within the last year, the result of intense cost-cutting as the publisher group prepares “Grand Theft Auto 6” for the finish line.  

With its release still more than a year away as “Grand Theft Auto 5” nears its 11th anniversary as a top-five live service alongside “Fortnite,” “Roblox,” “Call of Duty” and “Minecraft,” the delay of the expected billions “GTA 6” will rake in has made it difficult for Take-Two to find much to brag about in its earnings.  

After acquiring mobile giant Zynga in 2022 for $12.7 billion, Take-Two saw the cost of that deal come to pass in its last earnings report, when it wrote down nearly $3 billion in losses ahead of an additional deal to acquire “Borderlands” studio Gearbox from Embracer Group. The latter publishing group similarly embarked upon dramatic cost-cutting after years of aggressive M&A were undone by a planned $2 billion deal with Saudi sovereign entity Savvy Games Group that collapsed last year. 

It’s this push-and-pull of investors, particularly in the AAA space, that many game developers believe is the biggest contributor to the issues the industry has faced in recent years.

Of more than 600 developers surveyed by the Game Developer Collective, 59% indicated current market conditions were either “bad” or “very bad,” and of that portion, as many as 61% attributed “unreasonable investor expectations” as a factor. While mismanagement and high development costs were also popular responses, the concern over investors ranked higher than anything else.

This is understandable, especially in the AAA space. Games at this scale, be it live services or more traditional single-player games, now take substantial time to make.

Take-Two is one of the clearest examples of this. Its next iteration of “GTA” must exceed every expectation for players familiar with “GTA 5” and its online mode, but keeping the older game consistently updated with fresh content to maintain sufficient in-game spending throughout the course of developing “GTA 6” has made it difficult for the game to come together as quickly as “GTA 5” did. The 2013 game released just five years after 2008’s “GTA 4,” versus 12 years for “GTA 6” if it stays on time for its fall 2025 window.

Meanwhile, single-player game “Judas,” from storied developer Ken Levine, has taken just as long to make. Through his Irrational Games studio, Levine directed 2007’s “BioShock,” considered a classic of the gaming medium, as well as its critically acclaimed follow-up “BioShock Infinite” in 2013.

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However, the chaotic and disorganized development cycle for the latter led to Take-Two shutting down Irrational and setting up Levine with a smaller team, now Ghost Story Games. Take-Two's intent was for Levine to make smaller story-driven games, but debut title “Judas,” first conceived in 2014, still hasn’t released and won’t until sometime in 2025, a nearly identical cycle to “GTA 6.”

That’s longer than the time Bethesda Game Studios spent on massive open-world game “Starfield,” which became an Xbox exclusive when parent ZeniMax was acquired by Microsoft in 2021.

With such risks in the AAA space, it’s no surprise that the biggest M&A deals in the gaming industry have centered on live-service and free-to-play gaming, as a steady influx of in-game spending is more preferable to investors than waiting years and years for big games to finally hit their release windows.

This was much the case for Microsoft’s mammoth purchase of Activision Blizzard, which gave the Xbox owner control of franchises including “Call of Duty” and the entire King division, known for “Candy Crush” and other free-to-play mobile games.

Likewise, 2023’s biggest deal after Microsoft’s was when Savvy Games Group fully acquired Scopely, which also specializes in free games, marking the first time the Saudi fund spent billions to purchase an entire games company.

But as Newzoo analysts explained to VIP+ earlier this year, there are major caveats to companies pivoting so heavily to live-service games if they don’t already preside over one of the lucky five that collectively accounted for a quarter of all playtime on console and PC last year.

For companies launching into the space, new live services must compete with such brands that have often been established for at least a decade. Even modestly successful “Destiny” has spelled out this problem. The cooperative shooter from Bungie, the original studio behind “Halo,” became a modest success through its second incarnation that launched in 2017, so much so Sony’s 2022 acquisition of Bungie was meant to strengthen a big live-service push at PlayStation.

But a year later, Sony reportedly cut 100 roles at the studio as it canceled several online games as part of that push, including one for Naughty Dog’s “The Last of Us” not long after that IP became a core hit for HBO in the TV space.

If you pin the average development cycle for AAA games at five years, that still amounts to 20 earnings calls where investors can grill the top publicly traded game companies on where the new releases are and why more live services aren’t bridging the gap between those differences.

Until a more shared understanding is achieved, developers expect they’ll be the ones who continue to pay the price.