Job Cuts in the Gaming Industry: A Matter of Artistic Decisions, Not Technological Ones

As the tech industry grapples with widespread job losses, experts have weighed in on the possible reasons behind this trend. The general consensus is that this correction is a response to the hiring surge that occurred during the pandemic, when tech companies invested heavily in technological solutions to accommodate remote work and other pandemic-related needs. However, with the business cycle returning to normal in 2022, the projected revenue growth for tech companies slowed down or was revised downward, leading to a reversal of fortunes for some. The consequences of revenue loss differ significantly between private and publicly traded companies. While private companies can mitigate losses through management adjustments, publicly traded companies face intense pressure from investors expecting constant profit growth. This pressure can lead to job cuts as a means to realign businesses and secure financial health. Recent mass redundancies at Amazon, Alphabet, and Microsoft seem to echo the job cuts that began in 2022, initiated by Elon Musk and Mark Zuckerberg. Although the reasons for these job losses varied, they shared a common thread - mismanagement in pivoting core businesses towards new revenue streams. Satya Nadella's message to Microsoft employees emphasized the need for redundancies to secure the company's financial future, a signal aimed more at investors than the general public. The aftermath of the COVID-19 pandemic has seen a shift from expansion to contraction, with companies prioritizing financial security over growth. The optics of multinational companies announcing significant job cuts while posting substantial profits have raised eyebrows, particularly Microsoft's decision to lay off 10,000 employees while investing billions in Activision and ChatGPT. This phenomenon is partly attributed to a herd mentality among corporations seeking to conceal bad news amidst other announcements. The question remains whether the video game industry is immune to these trends. The answer is complex. While there have been job cuts in the industry, notably from Xbox teams and other gaming companies, no massive layoffs have been announced. This is because the video game industry operates at the intersection of technology and entertainment, with revenue streams differing from those in the tech sector. Revenue in the video game industry comes from new games, catalogue games, microtransactions, live services, and subscriptions. Catalogue games, once their development costs are accounted for, require minimal maintenance staff. Microtransactions and live services can scale up or down, often relying on contractors for short-term needs. Subscription revenue depends on new content to remain relevant, with the bulk of labor focused on creating and supporting this new content. Video games, as pieces of art, are subjective and not essential, making their future revenue difficult to quantify. Some games exceed expectations, while others underperform, as seen with Krafton's The Callisto Protocol and the success of Pokémon Scarlet And Violet despite its issues. This unpredictability makes revenue forecasting more of an art than a science, a challenge the film industry has faced since the 1980s. The video game industry has historically been resilient to macroeconomic downturns, with job cuts and studio closures more often tied to the performance of specific games rather than broader economic conditions. The industry's business cycle is governed by factors like console lifecycles, gaming trends, consumer behavior, and game quality. During development, publishers cannot cut jobs too quickly, as games still need to be developed. The "crunch" time, when coders work under pressure to meet deadlines, often necessitates more personnel, but training them to be efficient is time-consuming. Employment security in the video game industry is most at risk when a game is released and fails to meet revenue expectations, leading to painful decisions that typically affect developers and mid-level management. New studios and development houses continually emerge, creating jobs. The dynamic nature of the video game industry means that job hires and cuts do not follow a predictable pattern, unlike in the tech sector. The revenue generation in big tech, based on advertising, R&D, subscriptions, or applied science, differs substantially from the entertainment sector, where art plays a crucial role. In conclusion, job losses in the video game industry will occur but will be driven by the performance of games rather than investor demands. With 2023 expected to be a strong year for games, any job losses in the sector may be mitigated, reflecting the unique challenges and opportunities of an industry that straddles technology and art.