The video game industry is booming. Why are there so many layoffs?

Tech companies have laid off thousands of game developers in recent months.
(Shutterstock)

The video game industry had a banner year in 2023, with critically acclaimed blockbuster titles selling millions of copies. Yet, it was also a year of layoffs with 10,500 game makers losing their jobs. And with 5,900 reported layoffs in January alone, 2024 will likely surpass the previous year’s numbers.

An endemic crunch mentality, exploitation, work intensification and growing unionization in the game industry collide with government and lobbyist reports about economic prosperity and employment growth.

The industry contributed $5.5 billion to Canada’s GDP in 2021, an increase of 23 per cent from 2019. Global game revenue is predicted to rise from US$227 billion in 2023 to US$312 billion in 2027.

If the industry is booming, why are there so many layoffs? Who is benefitting? Who stands to lose? And what can we do about it?

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Cycles of layoffs

In terms of why this is happening, long-standing structural issues related to the supply and demand of labour lead to recurring layoff cycles. Very large teams spend years and hundreds of millions of dollars to make a single game. Historically, studios ramp up and hire employees in peak production and hand out pink slips after launch, as they “cannot sustain the expense of idle workers.” Critical and commercial failures escalate these layoffs.

In addition, the labour pool is growing. Post-secondary games programs have proliferated over the past 15 years. Thousands of graduates with expertise in game design, programming, art, cinematics and music enter the workforce each year with little prospect of finding employment in their chosen profession. These labour supply and demand issues collide with inflation and wider layoffs in the tech industry.

There’s an easy answer to the question of who benefits from layoffs — it’s
shareholders. Many of the largest layoffs have come in the wake of corporate takeovers. Some companies explicitly point to improving profit margins as their impetus.

Whether short-term returns will play out in the long-term remains to be seen. Layoffs often result in planned or ongoing game projects being cancelled and some of the teams left standing seem wildly understaffed. Activision Blizzard’s esports division reportedly had only 12 full time staff left after the latest round of layoffs.

Unions can help

Can unions protect game industry workers from layoffs? Vocal calls to organize are bolstered by reports that unionized workers have fared better. Indeed, unions can help.

First, it is more difficult for an employer to change the conditions of work or fire employees when there is an active certification campaign due to the risk of an unfair labour practice complaint.

Second, unions that are engaged in active collective bargaining are better placed to eliminate, reduce or delay the impact of known or anticipated layoffs. They may be able to use the threat of strike action to bargain down the extent of the layoffs or negotiate less harmful alternatives like job sharing, reduced hours or wage freezes. Workers in bargaining are also protected by the requirement to maintain the status quo on terms and conditions of work.

Third, unions can negotiate specific protective language into a collective agreement. This can range from prevention to mitigation and include “no layoff” provisions, retraining or reassignment obligations, imposed financial transparency, and required negotiation over the nature, extent and outcomes of any restructuring at a company.

But even unionized workers can be laid off. In many cases, the best a union can do is mitigate the impact through negotiated terms like longer notice periods, severance packages, recall procedures and supplementary unemployment benefits. In the end, a union can only protect what it has negotiated into the collective agreement, and employers strongly resist constraints on their operational flexibility.

California-based Riot Games, which is owned by Chinese tech giant Tencent, recently announced it was laying off 11 per cent of its global staff.
(Shutterstock)

Holding companies accountable

Another solution is to call for greater accountability from game companies, which benefit from public money. It is no secret that game labour costs are heavily subsidized through government tax credits in countries like the United States, Canada, Ireland and Australia.

The Financial Services Union, representing Irish game developers, recently called on the government to require employers to sign written statements committing to provide “quality employment” before they can receive a tax credit. Cyclical hiring and layoffs obscure employment statistics and reduce accountability. Governments should be concerned with whether or not their subsidies are creating sustainable jobs.

In addition, the post-secondary supply of “surplus labour” creates a vast and eager reserve workforce. This disincentivizes employers from investing in their employees. Universities and colleges need to take a long hard look at the role they play and the promises they make to students.

Claims that students are being prepared for well-paid, exciting careers seem dubious given the current employment situation. These claims are suspect given that few games programs systematically track the career trajectories of their graduates. Exactly what jobs are they preparing graduates for?

This is what we and our colleagues are tracking in our longitudinal employment study, The First Three Years. One of this article’s co-authors, Johanna Weststar, spoke about our initial findings regarding impacts on diversity and career longevity at the 2023 Game Developer’s Conference.

Some might take layoffs for granted as a natural part of mergers, acquisitions and other consolidation efforts, however layoffs and exploitation are not new in the game industry. Ultimately they are a symptom of a financialized industry focused on short-term gains for owners and shareholders.

Unions, worker and consumer activism, and demands for greater accountability for taxpayer dollars and the promises of higher education are important pieces of any solution. So too are efforts to envision alternative ways to craft a more sustainable industry. To address this broken system, we ultimately must ask who benefits from layoffs in a booming industry and systematically remove those benefits.

Jennifer R. Whitson has received funding from the Social Sciences and Humanities Research Council of Canada to support research on the digital game industry.

Johanna Weststar has received funding from the International Game Developers Association, the Social Sciences and Humanities Research Council of Canada and the Dancap Private Equity Research Award to support her research on the digital game industry.

Sean Gouglas has received funding from the Social Sciences and Humanities Research Council of Canada and the Higher Education Video Game Alliance to support research on postsecondary games education and the digital game industry.

Kenzie Gordon does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.