As always, the views expressed here are only the author's and may not be the views held by Antlion Audio as a whole nor any individual within the company.
Hello Antlions! Today I'd like to talk in broad strokes about the game industry. For those not familiar, I spent over a decade working within the industry and as Antlion customers are mostly gamers, essentially still do.
I hope to provide some context and insight on what's going on and what I believe will come next and further hope you'll find it all interesting and worth discussing.
The Situation Today
Things are not great for game developers, artists, and pretty much everyone in the creative side of making games. Nothing highlights that more than EA being purchased by Saudi Arabia's Public Investment Fund. To be clear, this isn't a political statement about the PIF, this is an economics problem.
To fund the purchase EA took on 18 BILLION dollars of debt and to service that debt has already stated intentions to cut 700 million in spending, of which 170 million is "organizational efficiencies." So yeah, a lot of people are about to lose their jobs and that's just the latest in what could become a record-setting year for game industry people losing employment.
Source: https://layoffs.asgc.gg/
The question we have to ask is why? Why all the layoffs? Are game companies seeing declining revenue or profit? No, it's not that, revenues will break all records this year.
There's really only one issue to talk about...
I For One Welcome My New Artificial Overlords
It's AI! It's always AI, but maybe not exactly how you think. There's two things going on with the whole "everything must AI" quagmire.
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Capital Investment
The biggest impact of AI is that it's sucking up capital investment like a hungry-hungry hippo. Every dollar invested in AI is a dollar not invested somewhere else. I'm not here to tell you if that is wise or unwise, it's just a fact. There's less money going into the pile of cash developers can draw upon to fund projects, which makes projects either harder to fund or debt more expensive to take on. Less cash in the system means fewer jobs, simple as that. -
AI Replacing Workers
A lot of companies, game companies included, are investing in AI as a way to reduce personnel costs. To justify that, and again I am not saying this is wise or unwise, they need to show the result of that investment and the easiest way to do it is firing people in hopes that AI's efficiency can make up the difference. The opposite is also happening, companies are seeing AI may not be ready yet and are laying off people they hired to try to get it to work. It's a mixed bag of turmoil.
Combine that with a struggling global economy due to more trade wars, real wars, and any number of events that make companies want to cut costs to ride out the bad times and you've got a recipe for... well, layoffs.
But it isn't all doom and gloom. Let's talk about the future!
The Circle Is Complete
The game industry has, for my life, followed the same cycle over and over again. That doesn't mean this time will be the same (it never is exactly the same), but if I were a betting man I would bet on this:
- The game industry thrives!
- A ton of money, employment, and risk enters the system
- Something goes wrong and a lot of people lose their jobs
- Those people form new companies with new ideas / IP
- The game industry thrives!
Source: Visual Capitalist. Note the dips / slowdowns in 1983, 2000, 2009, and 2022.
Let me break it down in an overly broad timeline. There's a ton of nuance to every single thing I am about to write so please, take this with a grain of salt. I am painting with a VERY wide brush.
1977: Atari finally cracks the code and starts the ball rolling with the VCS or 2600 as most of us know it.
~1979: Atari starts making "questionable business decisions." Those people leave and found companies like Activision, who then go on to later be founding members of EA (1982), Acclaim (1987), and so on.
1983: The game industry straight up implodes, our problems are nothing compared to this. Industry revenue falls 97%!
1985: Nintendo seizes the gap in the market and the game industry thrives!
2000: After 15 years of steady and solid growth the dot com bubble bursts. Online game services take the brunt of this along with Sega's console division. Amongst the casualties are Gameplay.com, Hasbro Interactive, The Learning Company and many more. Also Bungie was purchased by Microsoft because of this event. Fun fact!
~2001: From the layoffs of these dot com bust days come the founding of studios you're more likely to recognize: Firaxis (Hasbro), THQ (The intersection of Gameplay.com/Nordic Games and THQ is a great story, go look it up!), even foundational members of Leapfrog get their re-start here.
2004: Xbox Live Arcade and Steam (launched in '03) and casual games (e.g. Big Fish Games) combine to create an indie game golden age. The game industry thrives!
~2009: The Great Recession wasn't so great. 2009 was more the start than the end, the crisis puts the brakes on the good times and some more "questionable decisions" are made, such as EA acquiring PopCap for 1.3 BILLION USD in 2012. The casual games industry enters freefall by 2012 triggering mass layoffs. THQ goes under... again.
2012: The talent fleeing the collapsing casual game industry and the rise of Kickstarter (these two things are connected, I am sure) gives us Double Fine (Broken Age), Project Eternity (Pillars of Eternity), Star Citizen, and the Oculus Rift and many more, leading to games like Vanishing of Ethan Carter and Firewatch. YouTube opens up a massive platform for games to get noticed.
2013: The game industry thrives! Huge amounts of capital are invested into games and the publishing of games for the next decade.
2023: The pandemic hit games different. Because they were digital and we were all trapped inside, the game industry thrived like crazy. Capital was cheap thanks to quantitative easing and a lot of people were suddenly available for remote work. This lead to massive hiring, but by 2023 the luster had worn off and suddenly studios realized they were overstaffed. Combined with the looming fear of AI, studios begin cutting jobs to save capital and de-risk.
That's where we are now, still in that downturn, but games are not going anywhere and entertainment is recession resilient. So let's talk about the future.
THE FUTURE
One thing you may notice in that timeline is there's pretty big gaps when I say "The game industry thrives." The good times are not just flashes in the pan. They are prolonged stretches of stability and growth followed by comparatively short disruptions. That's good news, because when the next turnaround comes, it will probably be 5-10+ years of good times for game devs, and when they thrive we gamers eat well!
Conversely most crashes are pretty short by comparison, ~4 years of rough times, typically.
The other thing you may notice is there's typically some kind of disruption both at the start of the bad times and the start of the good times. This time around the cause and the solution are quite possibly the same thing.
AI.
AI is certainly a factor in the cause of our problems, but a solution? The dream of AI is that it will increase individual productivity, and there's plenty of evidence pointing to the fact that it can, will, or already is doing it. Nobody in the game industry stands to benefit more from this than a smaller studio. A big studio has all kinds of overhead that AI won't touch, but a one-man studio in his home office? It's not unreasonable to believe that their ability to create could more than double. We could be on the verge of a second indie game golden age!
I am not saying that AI slop is going to trigger an indie golden age. What I am saying is that some of the excellent professional developers affected by these layoffs are going to get their hands on those tools and make the most of them, creating at a speed and scale that they wouldn't be able to otherwise. Real, amazing, games-as-art with AI assisting the creation, not games created by AI.
Some of these people are going to found small studios or join startups capable of creating big projects. I predict within the next 2 years the game industry will thrive!
Or I could be totally wrong. Videogames are a pretty new industry in terms of what has existed in the world. Maybe my circle isn't as complete as I think, maybe some other disruption will come (for good or bad), but to misquote Saul Williams:
"The greatest videogames have not been born yet they are waiting patiently for the past to die."