A Gaming Industry Crash is Coming
Within the next 5 to 10 years the gaming industry will crash. The economics of it all just don’t add up to anything else. Mass layoffs, a crunch ecosystem, employee burnout, rising inflation, shareholder panic and runaway technological advancement will bring about a new dark age for the games industry and its consumers. This will overshadow the 1983 industry crash and the bursting of the Dot Com bubble at the turn of the millennium. What’s worse is that there is little that can be done to stop this from happening.
If this reads like scaremongering, good. The gaming industry needs a good scare. Take last year for example. 2023 saw unprecedented layoffs across the industry from AAA studios to small indies and everything in between. Studios either laid off hundreds of people, shuttered entire departments and some studios closed entirely. In total over 10,000 people lost their jobs across the industry, ten percent of these employees were let go in the month before the holiday season. EA, Epic, Amazon, Embracer Group, BioWare, Sega, ZeniMax, CD Projekt Red, Hasbro and Microsoft are only some of the big examples that let large numbers of people go due to profit margins. A hack at Insomnia Games late last year revealed that Spider-Man 2, the fourth highest selling game of 2023 in the US, had not yet made a profit. That says it all really.
In HeadStuff’s best games of 2023 list I wrote that while last year was great for games it was terrible to be a game developer. On reflection I don’t think that’s true. 2023 might have seen the release of great games like Baldur’s Gate 3, Star Wars: Jedi Survivor, the Dead Space remake and Cyberpunk 2077’s Phantom Liberty DLC but all of the studios behind these games were either directly or tangentially affected by layoffs. If it’s a bad year for game developers it’s a bad year for games, period. This is bad news for the future of games.
Of course, it’s likely that as development on new projects and games heats up in the future many of the 10,000 developers laid off will be rehired either by the same companies or by others. But many will not be. Some of these positions are gone and won’t come back. Others may be outsourced to poorly paid short term contractors or worse to AI by the more unscrupulous companies out there like Square Enix or Ubisoft. It’s already happened twice with game art from Wizards of the Coast the developers of Dungeons & Dragons and Magic: The Gathering whose parent company Hasbro let go of virtually all the people that assisted with Larian Studios’ sprawling RPG Baldur’s Gate 3. This is more than a large amount of consolidation by big studios this is a case of profit before people.
As companies lay off developers they are also purging themselves of the institutional knowledge required to develop new games or sequels that carry over assets and systems. Here’s a hypothetical for you: If id Software – developers of the DOOM games – lay off senior animator Jane and then hire Jack as a junior animator six months later as development on another DOOM ramps up how is Jack going to know how to fix the shotgun reload animation glitch that the Quality Assurance team keeps flagging? Jane was the only animator that knew how to fix the glitch but Jane was let go due to “corporate restructuring” by Bethesda, id Software’s owners, six months ago. I’m sure new hire Jack will eventually figure it out, after all a DOOM game without a good shotgun reload has no right calling itself a DOOM game. But Jack might spend days or weeks fixing the code for the animation when it would have taken Jane less than an hour. It’s a small thing and again only a hypothetical example but these small things pile up and have a knock on effect on development. Lots of small things lead to big things like game delays, shareholder panic and yet more layoffs.
So how does this all lead to the gaming industry crashing and burning? The reality is that people, the resource every industry relies on most, are a finite resource. Especially people with training and experience in game development. As more layoffs are made and as the wider public become more and more aware of the toxic work place environments and practices at every level of game development then the reality is that there are less people that will want to work in gaming. Now, there will always be people who want to make games but people also want to be treated right at work and the realities of game development are more obvious than ever thanks to games media and social media. Is every game development studio an abusive hellhole full of whip-cracking managers and meeting rooms full of cots? No but enough are that it counts. At a certain point the industry will start to lose more people than it can hire.
So what’s the solution? Unionization will solve some of the problems above. It will take some of the sting out of layoffs which sometimes are necessary to keep businesses afloat. Unions will also protect workers against bullying, harassment and unfair dismissal. They will allow for strikes, industry action and pay negotiations. This will help with staff retention and improve quality of life at work. It’s a growing movement within the games industry particularly in the west as Japan – one of gaming’s biggest marketplaces and development regions – with its toxic workplace attitudes and anathema for labor unions lags far behind even the gaming industry’s norm. Nintendo of course is the exception not the rule in Japan with its high employee retention rate, strict quality standards and future facing management board. In 2023 alone CD Projekt RED, ZeniMax and Activision Blizzard all have plans to unionize in the near future. An encouraging sign but as effective as a plaster on a gaping wound. Real change, unfortunately, must come from the top down.
That is unlikely to happen considering how beholden game companies’ management is beholden to shareholder desires for bigger dividends. As this year and the years following it go on development studios will find themselves pulling from a gradually shrinking pool of game designers. Some studios such as Rockstar, Naughty Dog and Sony Santa Monica will weather the storm but those in more precarious positions like Embracer Group and others that made risky bets and dangerous moves over the last few pandemic prone years will find themselves hemorrhaging workers, money and consumer goodwill. It’s a fact that economies fail, kingdoms rise and fall, even stars die but it’s the human cost that matters. Without real meaningful change within the industry gaming will never be the same and gold standard years like 2023 will be a thing of the past. That’s the future but all too soon it will be the reality.