This year has been insane for the video game industry, both good and bad with a lot of major game releases. Today was, unfortunately, another bad day. Epic Games is the latest company to announce another round of layoffs. This time, around 830 employees were affected, 16% of the Epic workforce. In addition, Epic Games has announced that they are divesting Bandcamp and spinning off most of SuperAwesome.
In an email sent to Epic employees, Tim Sweeney explained: “For a while now, we’ve been spending way more money than we earn, investing in the next evolution of Epic and growing Fortnite as a metaverse-inspired ecosystem for creators. I had long been optimistic that we could power through this transition without layoffs, but in retrospect I see that this was unrealistic.”
Sweeny continued: “While Fortnite is starting to grow again, the growth is driven primarily by creator content with significant revenue sharing, and this is a lower margin business than we had when Fortnite Battle Royale took off and began funding our expansion. Success with the creator ecosystem is a great achievement, but it means a major structural change to our economics.”
Sweeney said that they have been making efforts to reduce costs, including moving to net zero hiring and cutting operating spend on things like marketing and events. “We concluded that layoffs are the only way, and that doing them now and on this scale will stabilize our finances.”
Sweeney also talked about the decision for its divestitures in Bandcamp and SuperAwesome. ” Bandcamp is joining Songtradr, a music marketplace company supporting artists. SuperAwesome’s advertising business will become an independent company under the SuperAwesome brand, led by their current CEO Kate O’Loughlin. Kids Web Services (KWS), the parent verification and consent management toolset, will remain part of Epic. ”
Epic is offering a severance package that includes six months base pay and six months of Epic-paid healthcare in the U.S./Canada/Brazil. In the U.S., Epic is offering to vest any unearned profit sharing from their 401K. Epic is also offering to accelerate people’s stock option vesting schedule through the end of 2024 and are giving two additional years from today to exercise the options. Epic will also provide benefits including career transition services and visa support where they can.
“We’re cutting costs without breaking development or our core lines of businesses so we can continue to focus on our ambitious plans. About two-thirds of the layoffs were in teams outside of core development. Some of our products and initiatives will land on schedule, and some may not ship when planned because they are under-resourced for the time being. We’re ok with the schedule tradeoff if it means holding on to our ability to achieve our goals, get to the other side of profitability and become a leading metaverse company,” Sweeney concluded.
At the moment, Epic is prioritizing their must succeed initiatives: the next Fortnite season and Fortnite Chapter 5, Del Mar, Sparks, and Juno. According to Epic, their schedules remain in place. The layoffs will not result in Epic cutting any core businesses and are continuing to invest in games with Fortnite first-party development, the Fortnite creator ecosystem and economy, Rocket League and Fall Guys; and services for developers including Unreal Engine for games and enterprise, Epic Games Store, Epic Games Publishing, Epic Online Services, Kids Web Services, MetaHuman, Twin Motion, Quixel Mega Scans, Capturing Reality, ArtStation, Sketchfab and Fab.