Gaming layoffs signal lack of support from AAA developers for the future

Just three months after shelling out $68.7 billion for Activision Blizzard, Microsoft has slashed jobs in the gaming department, with the newly acquired studio taking the biggest hit.

For almost two years, Microsoft battled the Federal Trade Commission and the U.K.’s Competition and Markets Authority to seal the deal on acquiring Activision Blizzard. After dealing with lawsuits and making concessions, Microsoft triumphed on October 13. However, their victory celebration took an odd turn with a strangely sweet trailer welcoming a multitude of Activision Blizzard characters to their new “home.”

Recently, Microsoft let go of 1,900 employees (eight percent of its gaming staff) spanning Activision Blizzard, Xbox, and ZeniMax. This marks the biggest gaming industry layoff of the year, and experts predict that the situation won’t improve anytime soon.

“Today’s layoffs are an anticipated decision as acquisitions generally rely on the expectation to create more value at a lower cost,” Joost van Dreunen, a lecturer on the business of games at the NYU Stern School of Business, told Inverse. “Despite its size, Xbox has to respond to current market conditions. As the overall industry readies for a tough year, it is not out of step with the rest of the market.”

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Gaming industry has taken a huge blow

Microsoft’s move has led to the layoff of 5,800 workers in the gaming industry this year, as reported by Kotaku. This figure is significant, especially when compared to just over 10,000 layoffs for the entire year of 2023. Adding to this, Riot Games made headlines earlier this week by letting go of 530 employees, marking the third-highest cut after Microsoft and Unity’s 1,800 layoffs in January.

Though layoffs are undeniably painful, the recent cuts at Microsoft and Riot highlight a concerning trend that’s bound to inflict more damage on the gaming industry as long as these cutbacks persist.

“Layoffs in the video game industry are becoming the norm, even at companies that continue to deliver huge profits,” said Wayne Dayberry, Senior Quality Assurance Tester at ZeniMax and a member of the Communications Workers of America union. “Union representation can’t always protect against layoffs, but through union representation and the bargaining process, video game workers can establish greater transparency and policies that put our needs first, including layoff protections. That’s why we want every video game worker to join our union.”

Due to today’s layoffs, Activision Blizzard is scrapping its previously revealed survival game. An internal memo shared with The Verge mentioned that they are “shifting some of the people working on it to one of several promising new projects Blizzard has in the early stages of development.”

Activision Blizzard and Riot focusing on established franchises

Despite the cancellation of the survival game that Blizzard had hyped earlier, job listings for it are still active on the company website. These listings mention salaries ranging from $80,000 to over $200,000. The exact size of the remaining team at Blizzard is unclear. Microsoft didn’t provide a comment to Inverse’s inquiry about the matter but did confirm the legitimacy of the memos shared with The Verge.

As part of the layoffs, Riot also closed down Riot Forge, a joint venture between the studio and several indie developers formed in 2019. This collaboration brought forth games like Ruined King, The Mageseeker, and the upcoming Bandle Tale, all falling under the umbrella of “A League of Legends Story.”

Riot Forge was a part of the company’s efforts to create more spinoff games for League but didn’t have enough time to fully develop those projects before the shutdown announcement. Inverse’s request for comment on the end of Riot Forge was not immediately addressed by Riot.

Activision Blizzard and Riot seem to be focusing on their established successful franchises, leaving more experimental games in the dust. While it might make sense from a financial standpoint, it raises concerns about the industry’s future. Riot and Activision Blizzard are both well-heeled companies, with pockets deep enough to support more experimental games. This is especially true for the latter, now part of Microsoft, a company that just reached a $3 trillion valuation a day ago.

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Are AAA games in trouble?

Witnessing both of them stepping back from those projects doesn’t just mean potentially great games won’t see the light of day – though that’s a loss in itself. More crucially, it implies that developers now have one less route into landing a job with a major studio. Thanks to Riot Forge, indie developers who had already created some fantastic games got the chance to team up with one of the most renowned studios for ambitious projects with a massive potential audience.

Initiatives such as Activision Blizzard’s unnamed survival game could have provided developers a chance to collaborate with a successful publisher beyond its blockbuster titles. Losing such opportunities reduces the avenues for a career in game development, particularly for those lacking experience or interest in working on massive games like World of Warcraft or League of Legends.

The impacts of today’s layoffs are pressing and immediate for those directly affected. However, in the long run, each layoff also takes a toll on the industry as a whole. It leads to more developers vying for a steadily diminishing number of jobs, and the available jobs become increasingly focused on a narrower spectrum of games.

When even companies capable of backing untested games opt for safer ventures, it’s sure to leave the gaming industry and the medium itself in a poorer state.