Lay-offs and studio closures: the high-risk world of AAA game development offers little job security
Layoffs are a distressingly common occurrence in the world of game development. It seems like we can’t go a week without news that people have been let go from a studio that has just finished a project, or is in the process of completing what seemed to be a big-name title. Yesterday we learned that Radical Entertainment, the studio behind games like Prototype 2 and Simpsons: Hit and Run had been all but gutted by Activision. Why does this happen? Why is it so common in AAA game development?
A chaotic, unpredictable business
“We’ll start with the basic understanding that games are not civil engineering projects,” Keith Fuller told the Penny Arcade Report. When you’re building a bridge, you know the basic ideas behind the design, you have set labor costs, and you can plan the project with some degree of precision. I’m sure engineers will complain that it’s not that simple, but the fact remains we’re dealing with known quantities. “Games are an inherently chaotic and complex development experience. They are primarily research and development. You can split hairs… but by and large what we’re talking about is an environment where you can’t predict exactly what you’re making and what it will take to make it.” That’s where problems begin: it’s impossible to anticipate exactly what you’ll need and how long you’ll need it. Fuller spent 12 years at Raven Software, and now works as a consultant specializing in video game production. He also wrote the book Beyond Critical: Improving Leadership in Game Development. I had gone looking for someone who could explain the ebb and flow of game development, as well as the challenges unique to this art form, and Fuller was a font of knowledge. Staffing for a large video game project is a tricky thing. There are a limited amount of people needed to work on pre-production and, in terms of Raven being an Activision-owned studio, they had to give Activision enough data for the publisher to make a green light decision to put the game into production. This process takes five to ten people, according to Fuller. Once the green light had been given, the staff swells up to 20 to 30 people. “In the case of Wolverine, we wanted to make sure that the player controls are awesome, that Wolverine can do certain primary attacks, so do we have that game play hook in place? Is it feasible, and is it fun? That takes you the 20 to 30 people.” That larger team is in charge of making sure the tools are in place to make the game, the concepts are working are fun, and the game is feasible for the team and money being invested in the project. Once that game’s core mechanics and technology have been proven, it moves into full production.“We know we can do one widget, but now we need 100 widgets,” Fuller explained. “We know we can do a prototype level, but now we need to do 30 shipping levels. That’s full-on production.” At this point the staff swells to 80 to 200 people, working on what will become the final game. According to Fuller, the staff working on a something as large as a Call of Duty game is “hundreds and hundreds and hundreds of people.” Fuller estimated a $10,000 cost per man-month, so in a game with hundreds of employees, suddenly the developer is spending more than one million dollars a month in production costs. I asked if that was a reasonable number in AAA development. “It’s actually a little low,” he admitted. “That’s a Midwest number, shall we say. If you go West Coast, AAA development, that would be higher.” No one wants to spend that amount on a per-month basis for any longer than is necessary. So once the game is in playable shape and gets close to shipping, it’s important to get payroll down as soon as possible. “So you’ve gone from 10 people at the beginning, to 100 people in the middle, to 20 people, 10 people in the end to finish it up. So where did those 90 people go? That’s the big question. What do we do with those people?” At Raven, when three projects were in different stages of production, staff simply moved to the project that needed staff and left projects that were close to being finished. “When you have a one-project studio, and I’m trying not to name names, but it’s a historic case in point at this time anyway, Kaos Studios with Homefront. They were, to the best of my understanding, they were a one-project studio, so Homefront was it,” Fuller explained. “When they started to run into delays, or they had cost overruns, their alpha build was going to take six weeks or six months longer then they thought, and you don’t have another project to pull people from or to offset the development cycle, in that case, all you can really do if you’re lucky and your publisher plays along is to suck it up, and you’re adding to your cost, and asking for more advances on the development fees, with the hopes that when the game comes out you’re going to knock it out of the park.” So if 50 extra people were needed to complete the project, and the project is over, and costs need to come back down quickly, the ax is going to fall on those 50 people, if not more. The team is often slimmed down to a small crew to get ready for pre-production of the next game. In the case of Kaos, THQ made the decision to shutter the studio completely. What exactly goes wrong with these projects differs from game to game. It could have been an issue of imprecise planning, technology that wasn’t as mature as was hoped, or level design that had to be adjusted after testing. There are dozens, if not hundreds of issues that can pop up while a game is in production, and fixing them at that stage is an expensive, tricky job. “When you look at something like Homefront, we all saw these great trailers, and we knew they had a lot of talented people working there, and they had a good pedigree as a studio. It seemed like all the ingredients were there to make a really successful blockbuster title. Why didn’t they?” Fuller asked. “Because it’s an incredibly chaotic, complex and research-oriented endeavor, to make this huge game. For whatever reason, it just wasn’t the hit they thought it would be.” When production costs begin to escalate, the sales expectations for the game likewise go up. “There’s a fine line between doing pretty well selling 1 to 2 million units, and doing really well and selling 8 to 10 million units. There’s just a fine line there,” Fuller said. “To put it in the unfortunate terms of a Metacritic score, the difference between an 85 and a 90 is huge in terms of sales. That’s what you learn working for a publisher such as Activision.” The publisher has people who run the numbers and correlate them to sales, and an 85 Metacritic score is right on the precipice. Once you score above that, you’ve crossed over a plateau and you’re going to see a huge bump in sales. Below that? Things look dire. How do you determine that ahead of time? It’s nearly impossible. (For the record, Prototype 2 scored a 74 on Metacritic.) “Even though you may have run your project really well, and you’ve projected your scheduling needs, and hit your dates, you still might not recoup the exorbitant cost of top-tier development. There are cases when something goes wrong, and you end up paying for it… but there are also cases where you did everything right and you still don’t get the upside that you wanted, and one of the levers you have available to pull is layoffs,” Fuller said. Raven Software wasn’t immune to this problem, and staff was laid off following the release of the latest Wolfenstein title and then again after the release of Singularity. Sadly, those same market forces caught up with Radical. “Although we made a substantial investment in the Prototype IP, it did not find a broad commercial audience,” Activision said in a statement. Prototype 2 may have seemed like it was everywhere in terms of marketing and promotion, but with a high budget and the large marketing campaign that gave that sense of ubiquity, the game had to sell millions upon millions of copies to be profitable. Sadly, it didn’t make it.
The number of developers is shrinking
“Just in the AAA sector, we’re talking top tier of games, the Assassin’s Creeds and Call of Duties, in that space, if you looked at that area five years ago, maybe even less than that, there were a lot more players,” Fuller said. He lists all the major studios that have seen layoffs in just the past few months, or that have been closed completely. It’s a depressing list. “We have seen a serious winnowing of players, if you look at the number of people associated with these games, these are enormous numbers of developers. We’ve really seen a thinning out of the lower end of the AAA space, and moving towards what some people would call AAAA. If you look at a hundred million dollars being spent [on development], with maybe a quarter of a billion dollars for marketing costs worldwide? That’s an astounding amount of money to be throwing around.” It also makes the stakes incredibly high, and could retard risk and experimentation when it comes to high budget products. No one is going to want to spend that kind of money on a concept that may or may not find an audience, especially with so much blood in the water. I spoke with a few industry professionals who did note that, especially with larger publishers, there was often a strong push to relocate developers to other studios. “I'm a programmer, so it's a bit easier to find work than for production/design,” a software engineer who asked to simply be called “Jim” told me. “A lot of artists are on contract as well now, so it's quite common for them to roll off a project before it's finished. If the studio doesn't have a next project to roll into at that point, it's off to updating their demo reels.” Jim has worked at five studios in as many years. “You definitely get used to it, but facing a lay-off is never any less stressful.” One of his friends has been laid off four times in two years. The industry is also narrowing. Fuller points out that in the past there have been 20 studios you could classify as AAA. These days? A dozen to 15. “In a year how many are we going to have? Sure, they’re going to be enormous, but how many will there be?” He joked about a future where there’s a single “AAAAA” developer employing 25,000 people. I didn’t find it funny. So what happens to all the people who get laid off from these projects? Many of them leave the industry completely, and many move to independent or social games. There are very few “safe” jobs in the world of game development, and the risk inherent in creating games means that many projects will be cancelled, lay-offs are a part of life for many studios, and we may continue to see the crunch affect more of the mid-tier developers and studios. Budgets are swelling, pre-production remains an inexact science, and competition for entertainment dollars is only getting more intense. Fuller may have spoke in broad terms, and the specifics may be different from studio to studio, but these challenges are universal. This isn’t a problem that’s going away any time soon and, sadly, your favorite developer may be one rough project away from the chopping block.