GAME OVER, OR JUST A RESET: NAVIGATING LAYOFFS, COSTS, AND HOPE IN THE GAMING INDUSTRY

By Yash Dhaundiyal

Photo by Samsung Memory, from Unsplash

When I was seven, I was given an iPad, officially inducting me into the world of ‘iPad kids’. The term has become a joke now, but it was what introduced me to the world of technology and video games. Like many others, my introduction to gaming began simply, yet it sparked a deeper aspiration — to contribute to one of the most immersive forms of storytelling. Unfortunately, for those who have pursued this dream, the reality has often been harsh, with widespread layoffs and the closure of numerous studios casting a shadow over the industry.

As per a report by DDM games, the industry is currently in a ‘reset phase’. Ever since the pandemic-induced growth surge subsided, companies have realized the need for a recalibration. And calling it a ‘surge’ is no exaggeration — data from the International Data Corporation highlights just how massive that growth was. During the boom in 2020, revenue from mobile gaming grew by 32.8% to $99.9 billion alongside a 7.4% increase to $35.6 billion in consumer expenditure on PC and Mac games. Additionally, the revenue from home console games drastically increased by 33.9% to $42.9 billion.

With numbers like these, it’s no surprise that corporations couldn't help but get excited. Many assumed that such significant growth would continue for a significant period of time, sparking a frenzy of mergers and acquisitions. Between 2000 and 2024, 17 out of 23 of the most expensive video game mergers and acquisitions in history took place, involving major players such as Electronic Arts, Embracer Group, Microsoft, Sony, Take-Two Interactive and Tencent. This paved the way for the introduction of the metaverse as the future of gaming with Mark Zuckerberg at its front (spoiler: we’re probably not going to see it for a while).

Sadly, since 2020, the gaming industry's pandemic-driven growth has come to a halt. Mobile gaming revenue experienced a 15% decline in 2021, followed by smaller contractions of -3.3% in 2022 and -3.1% in 2023. Similarly, PC and Mac game sales growth rates dropped to 1.4% in 2022 before stabilizing at 2.1% in 2023. Home console games mirrored this trend, with stagnation in 2021 (0.7%), a decline in 2022 (-3.4%), and modest recovery in 2023 (5.9%). Although year end statistics from 2024 are not yet available, quarterly growth rates have either staggered or decreased.

“The projections that were made about future revenues in 2022 for 2023 and 2024 simply didn't materialize,” as things “returned much more sharply to the pre-pandemic baseline that a lot of folks estimated,” commented Lewis Ward, IDC research director of gaming, eSports, and VR/AR.

Moreover, in recent years, the cost of developing and marketing a ‘AAA game’ — a term used to describe high-budget, high-profile games from major publishers — has skyrocketed. Once estimated to be $50-$100 million, budgets often exceed $200 million for upcoming releases, with some even exceeding $300 million. The costs are anticipated to be even higher when considering titles such as Grand Theft Auto VI, with leaks suggesting a staggering US$2 billion budget. Such rising development costs have prompted publishers to cancel several games and lay off development teams.

However, it’s not just slumped growth or rising costs that have caused job losses in the video game industry, it is also a shift in consumer behavior. A generational shift in gaming habits is becoming evident, with younger gamers favoring smartphones and tablets over traditional consoles and PCs. Younger gamers increasingly favor free-to-play ‘live service games’ — continuously updated with fresh content — on mobile platforms, but trends like battle royale games are peaking, and 68% of producers say they can’t sustain such projects. This disconnect, alongside rising costs, forces studios to focus on big-budget titles based on established IPs, stifling creativity.

These layoffs have especially hurt junior staff and may leave lasting effects. The industry, already notorious for under-recruiting junior staff, has seen a third of them leave for good. The few available junior roles are highly competitive; XR Games’ talent acquisition manager, Andy Driver, noted: “We needed to hire four, and our job ad attracted 18,000 applications.” This ‘last hired, first fired’ model has created a shortage of experienced talent, with 68% of UK studios struggling to replace senior developers, and 98% reporting a lack of qualified candidates. Such a structure is unsustainable, raising concerns about long-term skill development and the viability of gaming as a career path.

Despite what seems to be a mountain of never-ending bad news for the gaming industry, there’s hope on the horizon — 2025 is shaping up to be a year of great relief as several anticipated titles are set to launch, such as Grand Theft Auto VI, Pokémon Legends Z-A, Assassin’s Creed Shadows, Monster Hunter Wilds, Ghost of Yōtei, Metroid Prime 4: Beyond, and Elden Ring: Neightrein. Furthermore, investors are speculating that Nintendo will release its successor for the Nintendo Switch, Nintendo’s best-selling home console and the third best-selling game console of all time. If such a release were to happen, video game sales and revenue can be expected to be significantly boosted.

Beyond the games themselves, the year is also expected to bring improved economic conditions, giving consumers more disposable income to spend on entertainment. Reports from GlobalData and Deloitte are equally optimistic, predicting the global video game market to reach $300 billion by the end of 2025, and the share of box office revenue from video game IPs to double. Ultimately, this coming year will prove to be of great importance for the video game industry, serving as a litmus test for whether the worst is truly behind or if further challenges lie ahead.