What causes the gaming industry layoffs?

What causes the gaming industry layoffs?

Part 2 – “Interlude – The Ebbs and Flows of a Game Project.”

Thank you John Wright for giving me the idea of making this a series rather than one giant post.
And thank you Carlos Salvado 🔜 GDC for having me go deeper on this.
Part 1 in the comments.

So we realized it isn’t AI – because it’s just a tool, just like Photoshop was a tool.
We need people to use the tools.
Do some people quit or get fired for not adapting?
Sure, I’ve actually heard stories already.
But it’s a handful of people in comparison with the thousands laid off.

I talked about R&D, new games, being essential to gain sustainability as a business. But why? What happens in the standard cycle of a game studio?

A game and it’s ideas, most of the times, come from previous work experiences. Maybe not a copy from some other product, but at least a lot of anchors that are coming from the seniority of the team itself.
When you hire, you seek out this seniority, despite the rigidity that it brings.
As time moves on, the rigidity increases.
It’s good, processes emerge, content treadmills form, and revenue starts to pour in, ever increasingly optimized.

Gamers, players, costumers of the products have shifting moods.
The market changes every few months. Especially seen in genres that retain less (hypercasual) – there’s always some new trend to follow.
As their tastes change, so does the difficulty of maintaining a player base and the revenue from it. Which triggers a moment in every project, eventually: “Our cash cow is running dry, what do we follow up with?”

In this scenario, your team is rigid now.
They could go for a sequel, but it’ll feel like the same but worse.
So your product is rigid now, and changing it too much will cost players.
Your product is rigid now, events will only change the perception so much – and the uplifts aren’t as big as a new product launch.
Your market fit is rigid now, acquiring new users will be too costly.
(Fake ads help here, but let’s gloss over that for now.)

So what is there to do, when you found yourself without a new product to fall back on? Lower user acquisition budgets, probably.
But what’s the consequence? Less growth in the long term.
And now you have a rigid team on a product earning less and less.
What other cost savings will the company seek?
Layoffs.

I feel like this time I’m only re-iterating that the lack of R&D leads to companies not having a great new place to allocate resources to – but also consider that part of it is inevitable – you’d need to reshuffle teams and their mentalities to move them to new teams and products.

In the next part, let’s take this and zoom out – to the investor class.