Wave of redundancies in the gaming industry continues: Unity lays off 1800 employees

According to Reuters, game engine developer Unity is starting the new year with the biggest wave of redundancies in the company's history. Around 1,800 jobs will be cut by the end of March 2024. This corresponds to 25 per cent of the entire workforce. Last year, the company already eliminated over 1000 jobs in three rounds of redundancies.

Unity is one of the largest game engines in the world. Small to medium-sized studios in particular use the tool. According to Unity, more than 70 per cent of all top sellers for PC, consoles and mobile were produced with the engine in 2022. "Pokémon Go", "Cities: Skylines", "Among Us" and "Beat Saber" are just a few examples. Despite its great success, the company is not profitable.

Unity has had a turbulent year. The company tried to become profitable with various cost-cutting measures and new sources of revenue. In September Unity annoyed numerous indie studios with a new, more expensive payment model - the "runtime fee". Many smaller developers saw their existence threatened by the higher costs. The changes have since been reversed - at least in part. Long-serving CEO John Riccitiello had to leave in October as a consequence of the "runtime fee" scandal.

He was replaced ad interim by former IBM President James Whitehurst. In November he announced a "reset of the company" in order to save costs. Among other things, a deal with Peter Jackson's ("The Lord of the Rings") visual effects company, Weta FX, was cancelled as part of the restart. Unity had previously acquired Weta FX's development division for 1.6 billion dollars https://www.theverge.com/2021/11/9/22772900/unity-acquire-weta-digital-visual-effects-lord-of-the-rings-peter-jackson.

In an internal memo, Whitehurst summarises the redundancies and the company's new start: "We are reducing the number of things we do to focus on our core business and increase our long-term success and profitability."

Layoffs in the gaming industry as a trend

The layoffs at Unity are part of an industry-wide trend that characterised the video game world last year. According to Game Industry Layoffs, more than 10,000 people in the gaming industry lost their jobs in 2023. In addition to Unity (1165 employees), the Chinese company ByteDance (1000 employees), the Swedish media group Embracer Group (962 employees) and Epic Games (830 employees) were hit particularly hard last year.

According to the industry portal gamesindustry.biz, the reasons for the redundancies are manifold. Many companies spent too much money during the gaming boom in the pandemic and grew too quickly. Added to this are economic factors such as high interest rates, inflation, rising production costs and increased competition.

Industry insider Serkan Toto summarises: "The urgency to cut costs (...) is much greater now. CEOs are under pressure to swing the hammer and tackle the biggest cost block of all, namely personnel". According to Toto, the redundancies also have a domino effect: "Companies think: if we don't do it, our competitors will do it and outperform us (...) in terms of efficiency. In addition, CEOs often believe that 15 to 20 per cent of their employees are superfluous at any given time anyway".