Epic Games has announced that it is laying off around 830 employees – around 16% of the company’s total workforce – and splitting off recent acquisitions, with Epic CEO Tim Sweeney admitting that they have been “spending way more money than we earn.”
All affected employees will received a severance package of six months pay, and Epic-paid healthcare in the US, Canada and Brazil.
In addition to the employees being let go from Epic Games and their network of studios, they will be spinning off the advertising side of “kidtech” specialists SuperAwesome, which they had acquired in late 2020 – Epic will keep the parent verification and consent management tools – and are selling off online music store Bandcamp, which it had acquired in March last year, to music licensing platform Songtradr.
In a publicly posted letter to employees, Sweeney said, “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. I had long been optimistic that we could power through this transition without layoffs, but in retrospect I see that this was unrealistic.”
Through the full letter, Sweeney notes that while Fortnite has started to grow as a game and platform once again, this is largely off the back of creator content, which features revenue sharing. This impacts on Epic’s margins compared to Fortnite’s season passes and cosmetic skins sales.
The decision to make layoffs has come following moves to stop the company headcount growing through “net zero hiring” and cutting down on marketing and events costs. It sees Epic falling in with tech industry trends of the past year, having made massive acquisitions and gone on hiring sprees through the pandemic and lockdowns, before taking the current financial uncertainty as an opportunity to make sweeping cuts and layoffs. Roughly two-thirds of the layoffs are coming outside of game and Unreal Engine development teams, but this will still have a sizeable impact to the company and its subsidiaries – layoffs have been confirmed at Fall Guys developer Mediatonic, for example – and will affect some projects and development timescales.
“We’re ok with the schedule tradeoff if it means holding on to our ability to achieve our goals,” Sweeney said, “get to the other side of profitability and become a leading metaverse company.”
This news could be concerning to Epic’s investors, which includes Tencent (40%) and Sony (4.9%), and does call into question some of the decisions made by Sweeney (who holds a controlling stake). The landmark court cases waged against Apple and Google over their app store fees failed and have cut off significant revenue sources for Fortnite Battle Royale on iOS and Android (though side-loading is possible on the latter), the Epic Games Store has been a massive loss-leader for the company as they rail against Steam’s hegemony on PC, and non-gaming acquisitions have been rather hit and miss.
Our thoughts go out to those now facing unemployment and hope they can find new jobs and positions soon.
Source: Epic
