The bust after the boom hits the video game business

This week, TikTok parent ByteDance said it’s retreating from mainstream video games altogether.

Earlier this year, Epic Games, the maker of Fortnite, a game that has had more than 400 million “unique registered users” since its 2017 launch, announced hundreds of layoffs as well.

They’re just some examples of the wave of layoffs hitting game companies around the globe.

Marketplace’s Lily Jamali spoke with Los Angeles Times reporter Sarah Parvini, who covers the video game sector. In a piece just last week, she wrote that the industry is deep in downsizing mode.

The following is an edited transcript of their conversation.

Sarah Parvini: If we’re talking about the last year or so of layoffs in the video game industry, figures now have even gone up since the time that I’ve written the article. We’re closer to about 8,000 now, and that’s globally, of course, but with a lot of those hitting folks in California because the state is sort of disproportionately represented when it comes to the video game industry.

Lily Jamali: Eight thousand is a lot, and that’s at a minimum, right? Because you were, you write that some gaming companies just aren’t disclosing the number of jobs they’ve cut.

Parvini: Absolutely. So the folks who actually work in the industry believe that number to be much higher. We can’t know if the companies don’t disclose.

Jamali: Right. So why is this happening? What are the main factors, as best as you can tell, driving these layoffs?

Parvini: Yeah, as I’m sure you know, it’s not just one thing that is driving these companies to lay folks off. We have, of course, the pandemic to blame a bit for this. People are saying that it’s a bit of a course correction after COVID. When folks were quarantining and following stay-at-home orders, there was a lot of free time just sitting in your house. And for a lot of people, that meant picking up a controller or hopping on to the computer and playing games. But as you know, those quarantine orders subsided, and folks started going back out again, that free time shifted into some of the things that people used to do. And that huge growth then slowed. And now these companies are realizing, OK, well we can’t keep that sort of breakneck pace and we need to correct a bit.

Jamali: And then you have the usual suspects in terms of macro factors, things like higher interest rates and inflation. But it sounds like some of these layoffs also have to do with how the games themselves are changing.

Parvini: Right. And so, you know, if a game calls for 50-plus hours of your time, think of how much disposable time you’ve got to play them. And if there’s more than 10 of them that you want to play? Well, I don’t know how you’re gonna get to all of it, unless that’s all you’re doing. So one of the people that I spoke with was telling me, you know, between splitting your time on these amazing games that are coming out, but that take hours and hours and hours of your time, and then streaming TV or streaming movies, also asking for your time, it’s almost like you have an embarrassment of riches. And so sometimes there’s all of this investment in these products, and perhaps they don’t perform the way that companies might want because so many things are competing for your time.

Jamali: So with that investment of time, it sounds like there’s a lot more pressure on every game release. It seems like the game sector as a whole is experiencing this correction. Is that right? I mean, we’re seeing this not just here in the regional economy on the West Coast, where a lot of these companies are based, but TikTok’s parent company, Bytedance, just decided to restructure its gaming division.

Parvini: Right, it is definitely not just a California or even U.S.-centric type of phenomenon. This is a global issue. And it is absolutely these global companies that are laying people off. You mentioned Bytedance. Perhaps it is some of these factors that we talked about, whether it’s pandemic correction or they thought that it might be easy to get into a certain sector of games and they realized it was harder or more saturated. But nonetheless, all of that speaks to your point that it is certainly a global issue.

Jamali: Here’s what I find so striking about this. We’re seeing layoffs, obviously, that’s not unique to the video game industry. But this is an industry that is actually still growing, right?

Parvini: Absolutely. You know, the initial projected growth from the data firm Newzoo was something close to $187 billion in revenue globally. They have since corrected it and brought it down a little bit to, I think, roughly $184 billion. Nonetheless, that is a staggering figure. And if you look at just the budget of some of these games, they can cost hundreds of millions of dollars to make. And if you think of that in comparison to the film industry, what it costs to make a movie, it’s astounding.

Jamali: And Newzoo, of course, is the data firm that tracks a lot of this stuff based in Europe. You talked to a number of workers who are navigating this moment. And I wonder what, what they told you. How are they dealing with this when so many of them are being laid off at the same time?

Parvini: Yeah, I think it’s kind of interesting. If you look across social media, especially if you look at places on LinkedIn, I see a lot of solidarity among folks who have been laid off — not just asking for help for themselves, but kind of amplifying other people, whether they worked with them or not, and saying, hey, this is a very talented person who needs to find work. Can you help out? And this moment of solidarity has been really, really interesting to see. But of course that comes with folks navigating for months and months through this jobs market. And, you know, I talked to people who have been looking for essentially the duration of the time that they’ve been laid off, so it could be six months that they’ve been looking every single day, and maybe even getting interviews [at] places but not getting that job. And of course, that can be demoralizing.

More on this

Making and even testing video games might sound like a lot of fun, but the business is known for long hours in the runup to release dates — “crunch,” in industry-speak. And workers aren’t always paid for all those extra hours.

A survey taken a couple of years ago found that just 8% of workers say they received extra pay.

In 2021, The Washington Post reported that crunch is legal. Many computer professionals who make more than a set yearly salary are considered exempt from overtime laws.

One response from workers? As in so many other industries, a lot of them are unionizing.