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In recent years, the entire gaming industry has been going through a turbulent phase, where almost all the companies are getting affected. This industry was enjoying rapid growth in the last few years, but suddenly that scenario has changed, and the current condition shows that those golden days are gone.
This stormy phase didn’t start in 2024, but the last year sped up the process with multiple unexpected studio closures and layoffs. In 2024 alone, over 14,600 employees were laid off, which was a 39% increase from the previous year. It seems like this trend will be the same this year as well, with NetEase and Warner Bros. already having initiated the process.
The downfall that the gaming industry has already been suffering through doesn’t start out of the blue. Several factors have contributed to this current crisis, and among them, two major factors are economic pressure and market saturation. Currently, the global economy is pretty unstable. Therefore, it has affected the entertainment industry to a great extent, including the gaming sector.
Gamers aren’t ready to spend on every game that releases. They have fixed the budget and are only purchasing selective games. This change in habit directly hits the revenue stream of gaming companies.
Aside from that, the gaming market has expanded a lot in the last few years, and the competition has grown unbelievably. Therefore, numerous games are released at the same time, which is leading all of them toward a fierce competition for player attention. This competition is once again making survival challenging for new titles and creating examples like Suicide Squad: Kill the Justice League, which did not meet sales expectations despite significant investment.
Additionally, the production cost of the games has increased considerably. Therefore, unless games are getting massively successful, it is getting harder for the studios to make a profit. Eventually, low profits lead to studio shutdown.
As the challenges started appearing, major companies have started taking essential measures to address these challenges, and one of the most important among them is organizational restructuring. Recently, for example, Warner Bros. Discovery has closed three of its game development studios: Player First Games, Warner Bros. Games San Diego, and Monolith Productions. Aside from that, it has even cancelled the anticipated Wonder Woman game. Well, this move is also part of a broader strategy, where the company is making a ground to focus on its core franchises like Harry Potter, Mortal Kombat, DC, and Game of Thrones.
Similarly, another big name in the gaming world, Netflix, has also taken some bold steps to reorganize its gaming division. This restructure has led to significant layoffs and the shutdown of its Californian game studio. According to the latest reports, this organization has revised its former strategy of investing in original indie games and is returning to the safest choice of developing games based on its existing intellectual properties.
Next came NetEase, and the decision that this Chinese game publisher organization made shocked the entire gaming world. After the groundbreaking success of Marvel Rivals, this company laid off the entire Seattle team. All of these decisions show a similar trend where the company is trying to scale its investments back to international studios to make more profitable games.
These trends are prominent, but what’s the cause behind all of these? Well, to some extent, this turbulent phase is the contribution of AI advancement. Basically, AI advancement is playing a dual role here: on the one hand, AI is streamlining the game development process, and on the other hand, it is leading to job displacement and devaluation of creative labor. Gamers aren’t at all happy with games using AI, and Call of Duty: Black Ops 6 has faced multiple criticisms for that reason. While the use of AI can accelerate the development process, it significantly undermines the artistic integrity of games, and most importantly, it leads to further job losses in an already strained industry.
To sum up the argument, this current wave of studio shutdowns in the gaming industry is the result of complex economic challenges, market saturation, strategic realignments, and technological disruptions. If companies are willing to survive this phase, they have to make a business model that balances profitability with creative innovation.
