The game player in the cold winter: yesterday was still working, today the position is gone.

Sophia, who works at an independent game studio in the UK, told Xia Guang She that a colleague she had a good relationship with was laid off because the company's position was directly eliminated.

She observed that although there have been layoffs in the gaming industry every year in the past, this year the situation is "much more significant."

Since the beginning of 2024, the global gaming industry has been hit by a wave of layoffs. If you visit the Videogamelayoffs website, you will see real-time updates on layoffs in the gaming industry, including the names of game studios, dates, and the number of people affected.

According to the latest statistics from the website, as of April 16, 2024, the total number of layoffs in the global gaming industry has reached a staggering 8,800 people.

In comparison, in the entire year of 2023, the gaming industry saw a total of 10,500 layoffs, and in 2022, there were 8,500. This means that within the first four months of the year, the number of layoffs in the gaming industry has already exceeded the total for 2022, and the trend is still increasing.

This paints a difficult picture of the gaming industry.

According to market research firm Newzoo's forecast, the revenue of the gaming industry is expected to reach $184 billion in 2023, with a year-on-year growth of 0.6%. However, previously, Newzoo's forecast was $187.7 billion. The downward adjustment of the data indicates the attitude of the market research company towards the gaming industry, and even a growth rate of less than 1% aligns with the perception of industry insiders as being quite challenging.

Currently, the global gaming market is facing limited growth, with waves of layoffs within the industry. However, perhaps this is precisely the best time for the gaming industry to reflect on itself.

While questioning the reasons for the layoffs, China's gaming industry can also gain insights from them.

### Alarming "8800"

On January 25th, Microsoft announced layoffs targeting its gaming division, affecting 1,900 employees, primarily from Activision Blizzard.

If this adjustment could still be understood as a necessary action following Microsoft's acquisition of Activision Blizzard, the wave of layoffs from major companies around the same time clearly demonstrates the distress within the gaming industry:

- On January 23rd, Riot Games, the developer of "League of Legends," announced a reduction of 11% of its workforce, totaling 530 positions.

- On February 27th, Sony Interactive Entertainment announced global layoffs affecting 900 people.

- On February 29th, Electronic Arts (EA), the developer of "The Sims," announced layoffs at a rate of 5%.

- On April 16th, Take-Two, the developer of "Grand Theft Auto" and "Red Dead Redemption," also announced a 5% reduction in its workforce.

According to domestic standards, companies in the software and information technology services industry with more than 300 employees are defined as "large enterprises." Currently, the total number of layoffs in the global gaming industry (8,800 people) is equivalent to nearly 30 large-scale internet companies.

Affected by the wave of layoffs, on March 21st, developers from various countries organized a "GDScream" opposite the venue of the Game Developers Conference (GDC), calling on industry practitioners to scream as loudly as they could to vent their anger over these personnel changes.

The layoffs in China are similarly severe. Since ByteDance withdrew from the gaming business at the end of last year, to the news of layoffs at a major company earlier this year, there is a growing sentiment that "making games is too difficult." Julia said, "Major domestic mobile game companies are also laying off employees. A friend used to work on projects for a leading company, but the entire division was cut, and a large number of people were laid off. The impact is significant."

In fact, influenced by cyclical patterns, any industry is susceptible to layoffs. Previously, the gaming industry would undergo normal personnel adjustments every year, but compared to before, this wave of layoffs presents more uncertainty and disorder.

Firstly, it's not just underperforming employees who are being laid off, but also those who have worked in the gaming industry for many years.

According to netizens, for example, at Blizzard, Matt London (former designer of "Hearthstone") and Monica Lee (producer of "Overwatch") have been laid off. Blizzard Entertainment co-founder Allen Adham also resigned during this period of turbulence.

Additionally, many layoffs stem from "the sudden termination of entire projects." "At the beginning of the year, my friend's entire office was 'cut.' Many projects were suddenly halted, which felt quite frightening," said Julia, who works at an independent game studio in France. "And, we were originally tasked with long-term operations for an independent game, which we worked on for five years, but the IP holder suddenly decided to stop."

Although Julia's studio did not lay off employees, personnel within the IP holder may be affected by "structural adjustments."

Mark, a designer at a major company, said layoffs always come unexpectedly. "I just got home from work, received an email, and then everything was gone." There are also users on social platform X who tweeted that they were the first programmer hired by their former company after the founder, with 25 years of experience in the industry, but "yesterday, I was ruthlessly laid off without any warning." The anxiety of survival led them to search for jobs on X.

The layoffs of 8800 employees are a result of the slowing growth of the gaming industry.

In 2022, the global gaming market experienced its first decline in revenue as the "stay-at-home bonus" from the COVID-19 pandemic faded. In 2023, the market returned to growth, but it seems to still be healing from internal issues.

Looking into the details, despite a 5.2% increase in revenue in the PC and console gaming market led by "Baldur's Gate 3" and "Hogwarts Legacy," industry insiders revealed that "many games were quietly cut, and only a few are visible." In 2023, the revenue of the mobile gaming market saw a decline of approximately 2%.

"In fact, the gaming industry was already in a declining trend before the pandemic, but the large-scale stay-at-home situation brought the market back to some extent. Now, after the reopening, it's even worse," Sophia told Xiaguang Media.

02 "Greed has messed everything up"

Gamers find it hard to forget the glory of 2020.

The pandemic kept most people at home, leading to an unprecedented boom in the gaming industry: in 2020, the global gaming market revenue reached $174.9 billion, a 19.63% year-on-year increase.

The data seemed to reverse the seemingly downward trend before the pandemic. Newzoo even predicted that by 2023, the global gaming market revenue would exceed $200 billion, reaching $217.9 billion.

However, looking back from four years later, this number seems overly optimistic.

"During the pandemic, many gaming companies expanded their workforce, but in the post-pandemic era, due to the impact of the overall environment, the previously overdrawn enthusiasm is gradually returning," Sophia told Xiaguang Media when discussing the chilling reasons behind the gaming market.

Taking Riot Games as an example, in 2021, it boldly purchased an office space of approximately 156,000 square feet in the affluent area of Mercer Island in Seattle and decided to hire 400 new employees. Two years later, the situation has changed drastically. The bubble that rapidly formed due to the stay-at-home bonus is also rapidly dissipating.

"Moreover, there are fewer and fewer people who have never played games. It's not very realistic if you want new users. It's hard to find someone who has never played games at all," Sophia added. Currently, the number of global gamers is limited, and the growth rate is slowing down, indicating an oversupply in the market.

Senior game planner Zhang Dashan believes that the main reason for the slow growth of the gaming industry is that there has been no significant development in hardware in recent years, resulting in games ultimately presenting "nothing new" and lacking "surprises" in player experience.

"Four years ago, 'Cyberpunk 2077' was amazing. But in recent years, the level of civilian equipment chips and computing power has not made significant progress. Users always expect better things, and if they have already tasted 'big fish and meat,' they certainly have no interest in 'ordinary dishes,'" Zhang said.

The external factors of technology, users, and the market have always been influential. Swen Vincke, the developer of "Baldur's Gate 3" at Larian Studios, publicly pointed out the root cause of the wave of layoffs in the gaming industry - because companies are too greedy.

Vincke believes that current game developers are too profit-driven, neglecting the importance of content and technical standards. "Since I started working, greed has messed everything up. I have been fighting with publishers all my life, and I keep seeing the same, same, same mistakes. It's always about quarterly profits, the only thing that matters is the numbers, then you lay off everyone, and then next year you say 'damn, I don't have any developers left,' and then you start hiring again."

The consequences of such actions are obvious. In the content-driven gaming industry, blindly pursuing profits will only lower the quality of game products. The instability of personnel will further manifest as a sense of division in the games, and no players will buy into products that only have gimmicks but no substance.

Taking Ubisoft as an example, gaming media Insider Gaming analyzed its strategic issues, stating that Ubisoft attempted to develop more than a dozen battle royale games from late 2021 to early 2022, but many projects were canceled during the trial period because they did not appeal to players.

Insider Gaming's description of Ubisoft also directly points out the central problems of other leading game developers:

"Ubisoft's strategy has strayed far from innovation and creativity, instead leading the company into a frenzy of chasing trends, trying to produce popular content at the time. From attempting to create the next huge free battle royale game to the desire for NFTs and Web3.0, this endless pursuit has led to countless projects being shelved, talent being wasted, and a large amount of funds being wasted."

03 How should games break the cycle from global to China?

In fact, this trend of chasing hot money and popularity exists in all content industries, including film, music, and literature.

They all attract a large amount of capital after rapid growth, experiencing a cycle of "barbaric expansion - decline - bottoming out." And the current gaming industry has once again entered the "decline" cycle. Essentially, this still tests the ability of practitioners to balance business and art.

Vincke believes that the key measure is still to "slow down." In times of industry ups and downs, when things are urgent, slow down, and when things are slow, they become complete. "You (game developers) can build up resources. Just slow down, slow down the pace of greed. You need to be adaptable, treat your employees well, and don't easily lose the employees you have cultivated. Because every time you lay off a large number of employees, you have to go through the same cycle over and over again."

Although the recent wave of layoffs has been concentrated in the European and American PC and console gaming markets, the Chinese gaming industry can also gain insights from it.

In the past decade, Chinese mobile games have been leading globally, with companies such as Tencent, NetEase, and miHoYo launching well-received and profitable games like "PUBG: MOBILE," "Rules of Survival," and "Genshin Impact." However, it seems that the recent trend of Chinese mobile games going global is facing challenges.

A retrospective analysis of the 2023 Chinese mobile game global expansion by Xaguang Media revealed that major companies still dominate the revenue rankings, while small and medium-sized enterprises are facing fierce competition, leading to a clear Matthew effect. Some industry insiders have expressed that after "Genshin Impact," there have been no new releases in the Chinese mobile game market for a long time. Similar to the European and American gaming markets, domestic game production in China seems to have entered a bottleneck period.

Sophia, who has worked in both domestic and international gaming companies, believes that the key lies in "not using an internet mindset to make games." While metrics such as daily active users, average revenue per user, and user acquisition costs are important, focusing solely on these may lead to neglecting the most crucial aspects of games—content and gameplay. "Games are not created through iterative updates and business models; the core of the game is whether it is fun to play or not," expressed Julia, who shares a similar viewpoint.

However, despite the downturn in the global gaming industry, Chinese mobile games going global may still find more opportunities.

Due to market characteristics, the European and American gaming markets are still primarily focused on PC and console platforms, with mobile games serving as a transition and supplement for fragmented time. However, due to the limited growth in the number of players, major companies have been attempting to "port" existing games to mobile platforms in an effort to attract more players, especially in the hyper-casual game segment. Yet, Chinese mobile games have already entered Tier 1 markets such as Europe, America, Japan, and South Korea, occupying a portion of the users' mindshare and also possessing a technological advantage.

The trend of European and American gaming markets venturing into mobile platforms can also strengthen cooperation between domestic and international game companies. Recently, the collaboration between Blizzard, a subsidiary of Microsoft, and NetEase sparked widespread discussions online. According to analysis, Microsoft's move is aimed at tapping into the mobile game market. At the end of last year, Phil Spencer, the CEO of Microsoft Gaming, publicly stated, "We will also communicate with other partners who want to gain more monetization opportunities on the mobile platform."

Zhang Dashan believes that although the competition in the global expansion of mobile games is fierce, it is easier to compete for high-quality works. "Everyone will strive to create, rather than simply copying and modifying as before. It seems that everyone will pay more attention to product quality, and the era of crazy user acquisition, plagiarism, and reskinning is over."

In addition, Sophia revealed that major companies such as Tencent and NetEase have already ventured into creating AAA titles overseas. In the future, Chinese game global expansion may not be limited to just mobile games but may also extend to PC and console platforms. Independent game developers in China have long been seeking to go global, and from the current perspective, if the content is solid and the gameplay is interesting, their revenue will not be lacking.

Regarding the future development of the global gaming market, several gaming professionals expressed that they are not pessimistic.

"If you are truly focused on creating games and content, rather than just focusing on data, then there is no need to be pessimistic. This time is not as terrifying as the great collapse of Atari in the 1980s (the period of decline in the American gaming industry). It's just suddenly entering a relatively flat stage," said Sophia.

Although the current situation is harsh, those in the industry who are dedicated to creating are still quietly working, but they need time to navigate through the cycle. Just as Vincke expressed:

Slow down and avoid greed. Only in this way can we break the cycle.

*The names Sophia, Julia, and Mark are pseudonyms.