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Greed and Glory – The Game Industry Paradox

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Photo Credit: The Contrasting Landscape of Gaming in 2023: Celebrations and Layoffs

In 2023, the video game industry found itself in a peculiar and unsettling paradox. Studios achieved record-breaking successes, engaged a massive player base, experienced substantial financial growth, and released critically acclaimed games that pushed the boundaries of interactive entertainment, as we saw the entire industry flourish in the eyes of the general public. However, as many of you reading this likely already know, mass layoffs swept through the industry like a tidal wave, leaving thousands of seasoned and talented employees without jobs and facing a grim forecast. Meanwhile, players were spending more time immersed in virtual worlds than ever before, and their willingness to invest their money into gaming was unprecedented. Games like “Baldur’s Gate 3” achieved acclaim, defying initial low expectations to become a bestseller and an award-winner video game. Sony, Nintendo, and Microsoft were all pumping out massive AAA releases, competing for sales, time, and award recognition.

How can such success coexist with job losses within the same studios? How are people expected to want to join the industry when doing good work can be met with joblessness? People who had recently lost their jobs found themselves in a situation where the games they contributed to were celebrated by players, winning awards and selling millions of copies. The question arises: what exactly is the end goal for these studios? I’ve discussed the relentless pursuit of short-term profit in the past, but 2023 has begun to raise a new question. What are we left with when all the dust settles as we return to the grindstone in 2024? More importantly, are we potentially watching the most profitable industry in the world cannibalize itself? If we don’t learn the right lessons and take proper action, it’s more than possible. 

The Epidemic of Layoffs

Major game studios have immense pull in the industry but are flying too close to the sun. Frankly, these studios don’t always know what’s best, but we have to take a step back to highlight some evident and consistent oversights. Let’s start by taking a closer look at the layoffs. In a chilling revelation, a website dedicated to tracking recorded layoffs within the tech and video game industries reported that over 10,000 individuals found themselves freshly unemployed in 2023. These people came from big and small companies, including behemoths like Playstation and Xbox. Shockingly, right before the layoffs at Playstation occurred, Sony reported record-breaking Q1 revenue from Playstation, with quarterly sales reaching over $5.6 billion, up a record high of 28%. The layoff numbers extend beyond gaming, affecting tens of thousands across the broader tech industry despite continued general growth. These layoffs, often abrupt and merciless, have sent shockwaves through the gaming community and raised questions about the sustainability of a once-booming sector.

The impact of these layoffs extends beyond mere numbers and will profoundly affect the success of these studios. It infiltrates the very core of the industry, leaving a trail of talented individuals who had once fueled the creative engine of gaming. Developers, artists, designers, and countless others whose passion for gaming had driven them to create unforgettable experiences suddenly found themselves in the unforgiving clutches of unemployment. While studios continue to compete for bolder and more complex projects, what incentive do most of these people have to hop back into such a turbulent industry?

With thousands of veterans gone, internal crunch and burnout inevitably rise as budgets get tighter and deadlines grow short. Meanwhile, according to a GDC report, over 50% of industry workers are worried about company layoffs, and over half actively support unionization. With the constant threat of job loss looming and notoriously high crunch expectations, surely we can’t reasonably expect productivity and quality to increase? This compounded the industry’s insistence on dated practices and a jarring lack of internal innovation.

The Retreat from Risk

In a climate where even successful projects don’t guarantee job security, the corporate temptation to stick to known formulas and established franchises grows stronger. In real-time, we see how this caution is beginning to stifle the industry’s traditionally exploratory spirit. With underwhelming performance from projects previously believed to be guaranteed hits becoming more common, major studios seem out of touch with what players are genuinely interested in. The prioritization of profit within the games themselves is starting to churn out flops, with games like Redfall underperforming as a first-party Xbox game (and crippling a once beloved auteur studio). Or look at the expected flop of not-quite-live-service Suicide Squad: Kill the Justice League, taking a studio known for their brilliant story-driven single-player games and asking them to churn out yet another looter shooter. 

As a result, studios have become disconnected from players’ preferences, leaving potential profits untapped. One notable example of this phenomenon was the case of Baldur’s Gate 3. Despite being lauded on release as a massive financial and critical success, internal documents from Microsoft/Xbox revealed that the game was internally dismissed, valued at only $5 million. They referred to it as “a second-run Stadia PC RPG.” Meanwhile, they were prepared to pay over $300 million for Star Wars: Jedi Survivor, a game that sits at mixed reviews on Steam, was widely refunded on launch due to its poor performance on all platforms, and which sold fewer copies than Baldur’s Gate 3 by the millions. Studios seem to think IP will sell games alone and have become tremendously out of touch with general audiences. Indie games are selling more copies than their AAA counterparts, with examples like Battle Bit Remastered hitting the number one spot on Steam and making headlines, which Battlefield 2042, a remarkably similar game, never even came close to accomplishing. 

The industry is now starting to see the significant impact of the studios needing to be in touch with their audience. Baldur’s Gate 3 defied these low expectations, breaking records left and right and selling upwards of 22 million copies, winning dozens of awards, including Game of the Year. However, even in the wake of such extreme triumph, Swen Vincke, the CEO of Larian Studios, revealed that nearly every person from Wizards of the Coast who had worked on the game had been laid off by Hasbro, their parent company. Even those responsible for celebrated successes, not to mention members of the only profitable sector of Hasbro, remained vulnerable to job insecurity. Players showed up en masse for the “risky” project, avoiding other AAA games that weren’t performing up to snuff despite being a part of popular IPs. Meanwhile, studios are letting go of the creatives who push for these projects, further enabling the cycle of repetitive copy/paste games that hardly make back their budget. 

The Future Impact

The consequences of the industry’s growing risk aversion and consolidation, in tandem with poor hiring practices and cutthroat layoffs, will shape the future of gaming in extreme ways. With fewer risks being taken, studios will pursue games they believe are popular, trending towards large-scale AAA releases, which means the rate of game output will likely begin to slow considerably. As budgets swell and creative choices become increasingly conservative, the industry risks losing the magic that has captivated players for decades.

AAA game production, in particular, is notorious for its brutal production processes, frequent delays, budget overruns, and ever-increasing resource demand. With major studios prioritizing immediate short-term growth over long-term strategy, the quality of games is already beginning to suffer, resulting in buggier, more expensive, and less compelling products. In this atmosphere, gamers and industry professionals may grow weary of the industry’s direction. We know players would rather wait for a complete release than be handed a glitchy mess, but studios continue to rush projects out the door. 

Meanwhile, the industry’s shift toward consolidation, with major players acquiring smaller studios, raises concerns about losing diversity in game development. Many AA studios have been bought out by the top 3 studios, making it more challenging than ever to greenlight a mid-tier project that may succeed but won’t bring in massive revenue to shareholders. As punishment, these studios are often internally dissolved, put to work on other more prominent titles within the company, and eradicating the creative identity that led to their purchase in the first place. Independent voices and unconventional ideas can get drowned out in this sea of corporate ownership, limiting the variety of games available to general consumers. The culmination of these factors paints a bleak picture of where we’re potentially headed. Gamers who once eagerly anticipated new releases may find themselves disillusioned by the increasing prevalence of buggy, uninspired titles. The quality of major AAA games, once a hallmark of the industry’s appeal, may begin to erode, leading to player fatigue and disengagement.

The very essence of video games—interactive storytelling, imaginative worlds, and engaging gameplay—stands at risk as studios prioritize financial predictability over creative innovation. In a world where players have abundant entertainment options, the industry’s inability to deliver compelling, polished experiences may result in lost opportunities and declining enthusiasm. Again, these consequences impact more than just the selfless pursuit of creativity. With players more critical than ever, the lack of job security and the industry’s volatility deter employees from continuing to pursue this line of work. The industry’s failure to invest in and nurture the next generation of developers may very well lead to a talent shortage in the future. The sting of seeing CEOs take home bonuses in the millions adds more salt to the wound. 

Fostering Innovation and Risk-Taking

One of the fundamental solutions lies in fostering a culture of innovation and risk-taking within the industry. While financial stability is essential to any company, it should not come at the cost of stifling their workforce. You have to break a few eggs to make a cake, and often, pursuing more considerable risks will be met with more significant rewards in an industry that caters to players who want something new, unique, and complete. Studios and publishers must prioritize projects that push the boundaries of gaming and excite players, even if an algorithm predicts they come with an element of financial uncertainty. Encouraging experimentation and supporting unconventional ideas can lead to the creation of groundbreaking games and give us bold projects like Tears of the Kingdom or Alan Wake II.

To address the talent shortage and ensure the industry’s long-term sustainability, studios must invest heavily in the next generation of game developers. Establishing comprehensive mentorship programs and internships and adding significantly more entry-level positions can help newcomers gain valuable experience and contribute to the industry’s growth, paying dividends for studios down the line when they need bold ideas from hungry talent. In tandem, the well-being of industry professionals should be a top priority. Advocating for better working conditions, job security, and mental health support can create a more stable and fulfilling work environment, encouraging team members to push through more challenging times with optimism instead of seeing a looming axe always hanging over their heads. 

Ultimately, addressing the paradox of the video game industry 2023 requires a collective effort from all stakeholders—industry professionals, players, studios, and publishers. It demands a commitment to preserving the essence of gaming while adapting to the current landscape. The industry’s formidable challenges present an opportunity for introspection and transformation. By working together and advocating for change, the industry can navigate these issues and ensure a vibrant and sustainable future for gaming. Executives will take immense courage to prioritize this, but I genuinely believe the health of the entire industry we love dearly is legitimately at stake. Today’s choices will drastically shape what happens for years, setting a precedent for what we as a community seek to prioritize. Our collective responsibility is to ensure it continues thriving as a bold and inclusive medium.