Valuable Lessons Learned from Studio Layoffs

The story behind Trash Goblin, a game developed by Spilt Milk Studios, serves as a metaphor for the company's own journey. After facing financial difficulties, the studio had to adapt and find new ways to survive. In 2023, Spilt Milk pitched their game to numerous publishers, but ultimately had to resort to launching a Kickstarter campaign. Although the campaign was successful, it was not enough to guarantee the studio's financial stability. As a result, the company had to let go of two staff members and refrain from extending a freelance artist's contract. However, when the studio's fortunes improved, they rehired the laid-off employees and made the freelance artist a full-time member of the team. The experience taught Spilt Milk the importance of being proactive and having a contingency plan in place. According to product and strategy director Nicholas Lovell, the studio's priority is to protect its team and institutional knowledge. While the approach may not be perfect, it has allowed the company to navigate challenging times and emerge stronger. Aurora Punks, a Swedish game publisher and co-dev partner, has also faced similar challenges. Founded by Robert Bäckström, the company expanded rapidly during the COVID-19 pandemic but later had to downsize due to financial constraints. Bäckström attributes the struggles of many game development studios to their reliance on a single revenue stream. He advocates for a portfolio strategy, where companies diversify their revenue streams to minimize risk. Bäckström suggests that studios should consider consulting or work-for-hire projects to supplement their income. This approach can help build a financial safety net and reduce the need for layoffs. Aurora Punks has implemented this strategy by developing premium mods for popular games like Fortnite and Ark: Survival Ascended. The company has also created its own paid mod, Necrotic Dominion, which adds a new map and spellcasting combat system to Ark. While this approach may require more management time and clear goals, it can provide a studio with a competitive advantage. Bäckström emphasizes the importance of culture and celebrating the successes of individual team members, particularly those working on consulting or work-for-hire projects. Spilt Milk Studios has also learned from its experiences and is now focusing on building a sustainable business model. The company plans to grow modestly, relying on a pool of trusted contractors to meet the specific needs of each project. By prioritizing consumer sales and developing a loyal audience, Spilt Milk aims to reduce its dependence on external funding and minimize the risk of financial instability. Ultimately, the key to survival in the game development industry is being proactive, adaptable, and willing to take calculated risks. By diversifying revenue streams, prioritizing institutional knowledge, and fostering a strong company culture, studios can navigate the challenges of the industry and achieve long-term success.