Epic Games Announces Layoffs and Business Divestments
Epic Games, the creator of popular game Fortnite, is cutting approximately 830 staff members, which accounts for 16% of its workforce. The company aims to reduce costs and create a sustainable financial ecosystem. CEO Tim Sweeney confirmed this decision in a memo and blog post, acknowledging that overspending and unrealistic revenue expectations were the primary causes.
“For a while now, we’ve been spending way more money than we earn, investing in the next evolution of Epic and growing Fortnite as a metaverse-inspired ecosystem for creators.”
To achieve financial stability, Epic has implemented cost-saving measures in marketing and events. However, despite these efforts, layoffs were deemed necessary. Sweeney also highlighted the company’s venture into the creator economy sector, enabling players to create and sell their own in-game content while retaining a 40% share of the revenue. While this move contributed to expansion, it also led to narrower profit margins.
“Success with the creator ecosystem is a great achievement, but it means a major structural change to our economics… We concluded that layoffs are the only way.”
Epic Games Sells Off Affiliated Businesses
The video game industry has experienced challenges this year, with major developers like Riot Games, Ubisoft, Activision Blizzard, and Epic Games making significant staff reductions. Smaller studios such as Romino Games and Volition have even shut down due to financial difficulties. BioWare and Firaxis Games have also carried out layoffs to streamline operations.
Sega has made notable changes by canceling its upcoming game Hyenas and undisclosed unannounced games as part of “structural reforms” in its European operations. Sega also plans layoffs at Creative Assembly, the game’s developer.
In addition to layoffs, Epic Games has decided to sell Bandcamp, a music marketplace it acquired last year, to Songtradr. The company is also divesting its marketing company, SuperAwesome, which will operate independently under its current CEO.
As a result of these divestments and layoffs, approximately 250 individuals will no longer be part of the Epic Games team. The company is providing six months of upfront salary and an additional six months of paid healthcare coverage for affected employees in the United States, Canada, and Brazil.
Hot Take: Epic Games Faces Challenges Amidst Industry Turmoil
Epic Games’ decision to cut staff and divest businesses reflects the ongoing challenges faced by the video game industry. While Fortnite’s success as a metaverse-inspired ecosystem for creators has contributed to the company’s growth, it has also resulted in financial strains due to narrower profit margins. The layoffs and divestments are strategic measures aimed at achieving financial stability.
This move by Epic Games aligns with a trend in the industry where major developers and publishers have undergone similar restructuring efforts. As the landscape evolves and companies face economic pressures, streamlining operations becomes crucial. It remains to be seen how Epic Games will navigate these changes and continue innovating in the highly competitive gaming market.
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