Lessons Learned from Layoffs in the Gaming Industry

The game Trash Goblin was created during a challenging period for its developers, who had to navigate financial difficulties while taking care of their team. In 2023, Spilt Milk Studios pitched the game to 20 publishers, but by the end of the year, they had pitched to 76 publishers, with only two offering terms and one entering contract negotiations. However, the negotiations fell through, and the studio had to launch a Kickstarter campaign to secure funding. Although the campaign was successful, it was not a huge success, and the studio had to let go of two staff members and not extend the contract of a freelance artist. The studio later rehired the two team members and made the freelance artist a full-time employee. The experience taught the studio the importance of having multiple revenue streams and not relying on a single source of funding. Aurora Punks, a Swedish publisher and co-dev partner, also experienced rapid growth during the COVID-19 pandemic, but had to lay off almost 30 people due to financial difficulties. The company has since taken a more cautious approach, focusing on creating a baseline of revenue to sustain each team. The company believes that a single-stream approach to revenue is unsustainable and that studios should think like publishers, having multiple potential revenue streams to stay balanced. Consulting or work-for-hire projects can be a way for studios to build a war chest and ensure they never have to lay off people. Having small, profitable passion projects that team members can work on during downtime can also be beneficial. Taking a more sustainable approach may mean slower progress on riskier and more ambitious games, but it requires understanding and patience from staff. The key to success is to have a clear-eyed evaluation of the risks and to prioritize the protection of the team and the studio's institutional knowledge. Spilt Milk Studios has learned the importance of having multiple revenue streams and is now focusing on growing modestly in size, relying on a pool of trusted contractors, and delivering cozy games that audiences want. The studio believes that its job is to persuade consumers, not just publishers, and that having a team with specialized expertise is crucial to success. By staying small-to-medium size, working with freelancers, and having multiple revenue streams, the studio aims to avoid financial risks and ensure its survival.