How video game industry is feeling the pinch of Big Tech layoffs

Deeper integration with Big Tech and sector's greater dependence on advertising weigh on job security

People play virtual reality video games during the Consumer Electronics Show in Las Vegas, earlier this month. AFP

Job cuts in the tech industry have led many grim headlines recently. It’s a trend that the video games industry is hardly immune to.

In fact, there was at one point a website called videogamelayoffs.com that had a second-by-second counter for “days since last mass layoffs”.

The story went: Executives overhire before a big game’s release, work employees to the bone, and, once the fruits of their labours line the walls of GameStop, fire employees en masse.

That video game layoffs website hasn’t been updated since 2021, but below is a rough tally of some of the recent pink slips.

Microsoft this week announced 10,000 job cuts, including some at 343 Industries, the company behind 2021’s Halo Infinite, and Bethesda Game Studios, maker of the coming Starfield.

League of Legends developer Riot Games, owned by China’s Tencent Holdings, retrenched dozens in its publishing, recruiting and e-sports departments.

Riot said it plans on hiring for 150 positions, and that the roles cut “no longer make sense for us”.

Game engine company Unity Software said it’s letting go 284 employees in its second round of downsizing in less than a year, slashing its sports and live entertainment division.

And in December, Israeli gaming company Playtika Holding laid off more than 600 employees.

With those kinds of numbers, it’s no wonder that last year also had one of the biggest-ever unionisation pushes in the gaming industry, as workers seek to insulate themselves from economic shifts and secure better pay.

It sounds rough, but the factors behind these decisions are different than they were a decade ago.

Sure, employees, particularly contingent workers, still suffer from job insecurity after a game’s release.

But a game launch isn’t the single biggest factor in employees’ job security any more.

The industry’s deeper integration with Big Tech — see Microsoft’s pending acquisition of Activision Blizzard — more dependence on advertising, plus new models for game development, mean the game job narrative is merging with the broader tech story of “bloat collides with recession”,

The tech industry has announced plans to shed more than 100,000 jobs in the past few months, as companies acknowledged they plumped up during the flush times of the pandemic and are now facing a new economic reality.

Executives at Amazon, Microsoft and Google parent company Alphabet have all sent contrite emails to staff.

“I don't think this is a game thing. I think this is a tech thing,” says Michael Pachter, an analyst at Wedbush Securities who follows the gaming industry.

There was a time when the games industry was considered immune to recession.

A high unemployment rate seemed to correlate with more people with their hands free to hold a controller. Recent trends have exploded that idea.

“Games are not a recessionproof industry,” says Laine Nooney, assistant professor of media industries at New York University.

“Games are really reactive to markets.”

Despite the recent bad news, things could look better this year.

After spending much of last year in a post-Covid funk, with games delayed and spending down an estimated 4.3 per cent, some analysts are banking on 2023 for a rebound.

After all, it’s got the most stacked game release line-up in years.