Epic Games, the company behind the wildly popular Fortnite video game, is taking significant cost-cutting measures resulting in the layoff of 16% of its workforce, reports Bloomberg.
The decision to downsize was communicated in a memo to employees by Epic Games’ Chief Executive Officer, Tim Sweeney, who acknowledged that the company had been spending more money than it was generating.
Sweeney expressed optimism about overcoming financial challenges without layoffs but now admits that was unrealistic.
While Epic Games has seen substantial growth, especially through its Fortnite Creator program, which allows players to create and sell in-game content, Sweeney highlighted that this program has lower profit margins compared to other revenue streams within Fortnite.
Previously, revenue streams like character customization (buying skins) had fueled the company’s rapid expansion.
However, with current reduced profits, sustaining the current workforce size is no longer feasible for the company.
Epic Games, headquartered in Cary, North Carolina, boasts over 400 million users for Fortnite and is also known for developing the Unreal Engine, a popular technology suite for game development.
Sweeney assured employees that no further layoffs are planned. He mentioned that an additional 250 individuals will depart from Epic through two divestitures: the sale of music site Bandcamp (acquired by Epic last year) and the spinoff of marketing company SuperAwesome (joined Epic in 2020).
Approximately two-thirds of the job reductions at Epic were from teams not directly related to “core development,” according to Sweeney.
Employees impacted by the job cuts will receive six months of severance pay, continued health insurance coverage, and accelerated stock vesting.
Layoffs have been a recurring theme in the gaming industry throughout the past year, affecting companies both large and small.
Embracer Group AB, a Swedish gaming conglomerate, recently shut down Volition, the studio responsible for the Saints Row games.
Niantic, the creator of Pokemon Go, announced earlier in the year that it was closing its Los Angeles game studio and discontinuing NBA and Marvel titles, resulting in a 25% reduction in its workforce.
