A wave of mass layoffs has hit the tech industry following dwindling revenue and projections of a global recession—and the gaming industry is not immune. The latest is Microsoft’s plans to lay off 10,000 employees as a means of cutting costs. The company made this known through a security filing on Wednesday 18 January 2023.
Microsoft has been expanding its sizable video game business with its popular Xbox series. Recently, the company has been making moves to acquire Activision Blizzard for $69 billion. However, that deal has been challenged by federal regulators.
Microsoft CEO Satya Nadella spoke with Klaus Schwab, the founder of the World Economic Forum (WEF) in a livestream before making the layoff announcement at the forum in Davos, Switzerland. “No one can go against gravity which in this case is inflation-adjusted economic growth,” Nadella said.
Microsoft blamed the job cut on pandemic-induced change in demand for digital services and looming fears of recession. The cut represents 5% of Microsoft’s 221,000 global workforce. The affected employees were notified on Wednesday and the company will complete the layoffs by the end of its fiscal third quarter this year (March ending).
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“We are living through an era of significant change, and from my meeting with partners and customers, a few things are clear,” Nadella wrote. “There was accelerated digital spending by customers during the pandemic. Now, they want to do more with less by optimizing their digital spending.”
The gaming industry had a fair share of job cuts in 2022
Last year was a challenging year for the gaming industry. There were job cuts across different companies following dwindling revenue. The rise in inflation has shifted customer spending to essential goods and services leaving less for entertainment.
Kabam, a gaming company that has developed a series of mobile games in collaboration with Marvel, Disney, and so on laid off 35 staff (about 7% of its workforce). The Vancouver-based company disclosed the development to the affected employees a week prior to the announcement.
“The decision was made after a review of our strategic priorities to adjust our resourcing structure in line with our goals. We will continue to hire in the coming years,” a spokesperson at Kabam told TechCrunch through an email.
Founded in 2006, the mobile gaming company was acquired in 2016 by South Korea’s Netmarble Games for a price within the range of $700 to $800 million. It has produced games with millions of downloads including Fast & Furious: Legacy and Blastron and Fast & Furious: The Game.
Tech firms that have announced massive layoffs so far
Over 50,000 jobs have been lost in the tech industry in the last 12 months or so. Big tech companies that were once considered untouchable are laying off a record number of employees. Below is a highlight of some big tech companies that cut over a thousand jobs. The figures below are based on filings and media reports.
Amazon (18,000 employees)
Earlier in January, Amazon CEO Andy Jassy made public the company’s plan to lay off over 18,000 employees. This will be the e-retailer’s largest job cut in its 28-year history. The most affected are employees in the stores and human resources divisions.
Amazon was one of the companies that profited from the coronavirus pandemic as they saw a boom in consumer spending. Consequently, they went on a hiring spree, doubling its 2019 fourth-quarter workforce of 798,000 to 1.6 million by the end of 2021.
Meta (11,000 employees)
The parent company of the social media giant, Facebook, announced massive layoffs in November 2022. According to the announcement, Meta was ready to part ways with 13% of its staff which sums up to over 11,000.
Meta is facing a stiff challenge from rival platforms like TikTok which has led to dwindling ad revenue. In the fourth quarter of 2022, Meta’s market cap plunged and its stock fell to its lowest since 2016.
Salesforce (7,000 employees)
As part of a restructuring drive, Salesforce is chopping off 10% of its workforce. In addition to that, the company is slimming some office space as disclosed in the January 4 announcement.
In a letter sent by the employees, the co-CEO Marc Benioff highlighted the changing customer spending habit occasioned by the difficult macroeconomic environment. Benioff called the decision to slice off a chunk of its over 79,000 employees a “very difficult decision”.
Tesla (6,000 employees)
Tesla CEO Elon Musk sent an email to Tesla staff in June 2022 informing them of a 10% cut in the number of salaried employees. According to estimates by The Wall Street Journal, that layoff affected about 6,000 employees.
“Tesla will be reducing salaried headcount by 10% as we have become overstaffed in many areas,” Musk wrote. “Note this does not apply to anyone actually building cars, battery packs, or installing solar. Hourly headcount will increase.”
Twitter (3,700 employees)
Upon the acquisition of Twitter, Elon Musk made sweeping changes that saw 3,700 employees leave Twitter’s workforce—which is about half the company’s staff strength. Other employees who are not comfortable with Musk’s leadership left the company after that.
Musk had made policy changes including telling workers to commit to the “hardcore” work environment. On his part, Musk said the layoff was inevitable as the company was losing $4 million every day.
Coinbase (2,000 employees)
The exchange grew quickly during the bull run. However, as the market turned on its heads, they realized that they had more staff than their payroll could carry. On 10 January, the company announced that it will cut a fifth of its workforce.
“With perfect hindsight, in retrospect, we should have done more,” Brian Armstrong, the CEO of Coinbase told CNBC in a phone conversation. “Once information becomes available, the best you can do is react quickly, and that is our approach.”
Stripe (1,100 employees)
The online payment processor made public its plans to lay off about 14% of its workforce in November, which sums up to about 1,100. The company staff was notified through a memo by the CEO Patrick Collison who blamed inflation, energy shocks, and looming recession, among others for the layoffs.
Stripe was valued at $95 billion at the beginning of last year. However, by July, the company lowered its internal valuation to $74 billion.
Robinhood (1,100 employees)
Robinhood, a retail brokerage firm announced in August that it was chopping down its workforce by 23%. This came on the heels of a similar 9% cut in April. According to reports and public filings, no fewer than 1,100 were laid off from the company.
Vlad Tenev, the CEO of Robinhood blamed the deteriorating macro environment, the crash in the crypto market, and inflation that has hit a 40-year high.
Shopify (1,000 employees)
Less spending means more trouble for payment processors. In July 2022, Shopify revealed that it laid off 1,000 employees, about 10% of its global workforce.
CEO Tobi Lutke sent a memo to the staff accepting that he misjudged how long the boom in e-commerce driven by the pandemic would last.
Snap (1,000 employees)
Snap announced that it had let go of 20% of its employees in late August 2022. That figure sums up to about 1,000 employees. The CEO of Snap, Evan Spiegel sent a memo to employees informing them about the company’s restructuring drive.
According to Spiegel, the restructuring was crucial for the company to deal with financial challenges. He further highlighted the company’s dwindling revenue compared to the previous year.
How will job cut affect the gaming industry?
Gamers are mostly used to delays—which sometimes happen more than once for some titles. However, a significant slash in the workforce of most game-developing companies will likely make delays the norm rather than the exception.
The rippling effect of a massive layout in the gaming industry will be mostly felt by people that have built a career and their finances around game reviews and walkthroughs, particularly those with thriving YouTube channels.
No new games to play and share would mean dwindling earnings for YouTubers. Hopefully, we will not get there.
