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Is the games industry really dying? Twisted Pixel’s lead designer dives deep into layoff data

Is the games industry really dying? Twisted Pixel’s lead designer dives deep into layoff data

Ben here!  Dan Teasdale is the lead designer at Twisted Pixel, and also worked on the Rock Band franchise. He mentioned that he was digging through the numbers to get an accurate picture of layoffs in the video game industry, and I told him I'd love to see what he found. This post was the result of that conversation, and holy hell there is some interesting stuff in here. Enjoy!

It seems like every other day we hear news about game industry layoffs. The article text is usually the same every time: “big studios are laying off people all the time these days, and x is the latest victim.” UK developer Eurocom was more direct, blaming the shutting of their studio on “a steep decline in demand of console games.”

The problem I have with that message is that nobody’s actually provided data that indicates we’re all going to die* - it’s all gut checks, predictions and excuses.

As a stat nerd, I wanted to see the data behind the claims. As a console developer**, it’d be nice to know if I’m going to be out of a job or not soon. Unfortunately, it appears that no real data exists. People are getting laid off, but nobody had spent time figuring out where and why these layoffs were happening.

I decided to gather this data myself. I have collected information about every layoff that happened in 2012, then mapped that against a range of other data like platform, team size, location, even previous title review scores. This article is the result of that data mining.

Is the game industry dying?

The first thing we need to establish is a sense of scale. Last year, there were around 3,000 developers affected by layoffs worldwide. For North America, 2.42% of all “game developers” were laid off. Is that good or bad? How does that fit in with the number of layoffs in other North American industries?

2.42% isn’t perfect, but it’s also not the end of the world either. Stable manufacturing industries are around 1% of total, whereas riskier industries like technology are approaching 4%. Layoffs suck, but as an industry, we’re not disintegrating.

Are console developers getting laid off more?

This is the gnarliest data to go through, unfortunately, so we’ll have to take some twists and turns to come to a conclusion on this. Looking at the the raw number of people affected, MMO teams laid off more developers than console teams***.

Given the scale of MMO teams, it’s understandable that when they fail, they fail big. Last year saw the collapse of 38 Studios, the closure of Paragon, and layoffs at top tier MMO studios like BioWare Austin and Blizzard. Seeing that reflected in displaced headcount makes sense.

There’s a flipside to this data, though:

While more developers were laid off from MMO studios, more console studios had layoff events. On average, console developers also laid off larger chunks of their teams in those events.

If you only look at studios that closed their doors in 2012, console developers are also in the top slot:

Game over, right? Console gaming is dying? Not so fast! This data is harder to give a conclusion on, since it’s missing a whole bunch of additional context and information:

  • We can’t normalize the data to show how much console gaming shrank as a percentage compared to other segments, since we don’t know have a breakdown of “total console developers” or “total MMO developers”. There were more console closures, but there are more console studios to start off with.
  • We don’t have a clear sense yet of how many studios were founded after those layoffs, and in what segments they were founded. What if all the Social/Mobile developers just founded new studios when they were laid off? How many are still unemployed?

Because of that, this data alone isn’t enough to come to a real conclusion about health. There is another set of data we can apply to all this information to try and resolve this question, though:

Are good console developers getting laid off more?

Let’s take the assumption that if console gaming is failing as a segment, then developers of good console games will fail more than developers of good MMO, PC, or mobile games.  It seems like the easiest way to evaluate this would be to plot studio Metacritic scores**** against how much of the team was laid off when layoffs hit:

While it’s noisy, it does reinforce the “Metacritic 85 or Bust” mentality that most publishers seem to have. While the volume of layoffs in the 70-80 range makes things noisy, there’s also a loose pattern of teams with lower rated games laying off more of their workforce than layoffs amongst higher rated games.

What’s causing the top games to fail, then? Are they failing because of their platforms?

If you take the studios that scored above a Metacritic 80 but still encountered layoffs, over half of them are MMOs. No console-focused developers with a 80+ Metacritic had any layoffs.

If we take a look across average Metacritic by platform, the console companies that fail are releasing  games that are more poorly reviewed than those in other segments:

While this probably isn’t a surprise, it’s a clear indication that it’s way harder to survive as a social or MMO developer than a console developer. If console gaming was dying, we’d be seeing developers making great games yet failing to succeed financially, which isn’t what this data shows.

Are Austin and Boston ghost towns for game development now?

If you examine the numbers by headcount, it’s pretty scary.

Both Boston and Austin look bleak for 2012 - alone, they comprise a third of all worldwide displaced headcount. Boston has had more studios close, but Austin is a smaller town with the same rough amount of people displaced. Both of these locations were MMO and Social heavy.

The flipside of this is that we don’t have solid data on how many of these developers spun out to start new studios. We won’t have this data for a while, but hopefully efforts by Juegos Rancheros and Boston Postmortem will help reseed talent.

While I’d heard of a bunch of non-US layoffs, the scale of how badly the UK was hit wasn’t apparent to me until compiling this data.

If you look at the number of companies that closed their doors and percentages of teams remaining on remaining studios, the UK is clearly the hardest hit area of the world.

In terms of headcount, over half of the UKs layoff headcount came from Eurocom’s closure. In Eurocom’s case, the data fits our observations about title quality and contradicts Eurocom’s “steep decline” claims: Eurocom’s most recent Xbox 360 titles had scored Metacritic ratings of 5.6, 6.0, and 4.4.

That doesn’t account for the amount of studio closures, though. Looking through the data, the majority of UK studios hit or closed were from subsidiaries of either Japanese or US publishers. In that sense, it hints towards the parent company finding it “easier” to lay off remote teams before local teams: in the case of publisher-owned closures, the UK teams were closed or laid off alongside a smaller percentage of talent in other locations.

Conclusion

There’s a lot of different messages here, but “layoffs mean the games industry is dying” isn’t one. What we can clearly say is:

  • Game developers are seeing more layoffs than established low-risk industries like manufacturing, but are not undergoing a large layoff phase on the scale of other industries like IT/Technology.
  • MMO developers were hit the hardest in terms of number of people. MMO and Social/Mobile teams were also hit in terms of the quality needed to be successful. Shipping an 80+ metacritic title does not guarantee success in these segments anymore.
  • More mid-tier console studios were affected by layoffs, but they did not lay off the most amount of people. This might be a reflection of the console “middle” getting squeezed out. It’s no longer good enough to ship an okay “B” game to succeed, you now have to ship great games to succeed on consoles.
  • Austin and Boston, both hubs with primarily MMO and secondarily social developers, were hit the hardest in North America. In Europe, the UK took the brunt of the damage, but mainly due to a concentration of sub-80 Metacritic studios and offshoots of publishers that are reducing overall size.

* No, NPD doesn’t count, and hasn’t been relevant for a long time. Even when console and PC gaming was 100% retail, NPD’s numbers were off by a non trivial amount. In an age with Steam, mobile games, and day 1 downloadable console games, NPD’s retail-only analysis is now looking at a small minority of all game sales.

** A disclaimer: Yes, I work for a console game developer. My employer has not seen or contributed any content towards this article, and all data presented is accurate to the best of my knowledge. If you think some of the raw data is inaccurate, let me know on Twitter at @deliciousbees and I’ll look into it.

*** This is not as cut and dry as “console” vs. “PC”, since a lot of developers target both platforms. In this example, we’re considering the lead platform to be the primary platform - for example, while Relic has produced console games, they are primarily a PC-targeting studio.

**** I am not a fan of Metacritic for many reasons, and don’t really support it as an accurate scale of rating games. In this case though, the negatives of Metacritic (score conversion, arbitrary sites picked, etc.) don’t really impact the difference between a MC 55 title and a MC 85+ title, which is what we’re looking for.