The Gaming Industry’s Crisis: A Wave of Layoffs and Studio Closures
The gaming industry is facing a significant crisis, with an estimated 45,000 video game jobs cut between 2022 and mid-2025. This staggering number represents entire studios shutting down, projects being canceled mid-development, and decades of institutional knowledge leaving with severance packages. Early 2024 was particularly harsh, with 8,619 jobs lost in the first quarter alone—marking the highest quarterly number in gaming history. According to the Game Developers Conference’s 2025 State of the Game Industry report, 41% of game developers were impacted by layoffs in 2024, either directly or through team cuts. The troubling aspect is that this wave hasn’t reached its peak; it’s still building.
The COVID Boom Created an Unsustainable Bubble
During the pandemic, the gaming industry experienced explosive growth as people spent more time at home and increased their spending on games. Investors took notice, leading to hiring sprees and expansion of teams. However, this growth was not sustainable. Once people could leave their homes again, spending plateaued, and the bubble began to burst.
Embracer Group serves as a prime example of this disaster. The company went from having 15,701 employees to 7,873, cutting more than half its workforce. They closed or divested 44 studios and reduced their game projects by 80. This wasn’t just restructuring—it was dismantling.
AAA Development Costs Have Become Untenable
Some major franchises now exceed $500 million when factoring in marketing costs. When budgets reach such high levels, publishers can’t afford to take risks or justify large teams working on experimental projects. Everything must be a safe bet, which means sequels and live-service games designed for ongoing revenue.
Sony closed Firewalk Studios after their live-service game Concord flopped, resulting in 170 layoffs within weeks. They also shut down Neon Koi, cutting another 40 employees. This illustrates how little margin for error exists today.
Developers are either investing $300 million on a blockbuster that needs to sell tens of millions of copies or creating indie games with tiny budgets. Studios that used to make interesting, moderately-budgeted games struggle to find funding because investors want guaranteed hits or cheap experiments, nothing in between.
Players Are Feeling the Impact Directly
When experienced developers are laid off, games suffer. Institutional knowledge is crucial, and you can’t simply replace people and expect the same results. Game delays and cancellations have become routine, with projects being killed mid-development when studios realize they can’t afford to finish them or when new management decides they’re not profitable enough.
The aggressive monetization practices that players often criticize are partially driven by these cost pressures. Tekken 8 director Katsuhiro Harada had to explain on Twitter that without in-game purchases, the game couldn’t survive financially. The gap between what games cost to make and what players expect to pay is widening, and developers are caught in the middle.
Studios Are Closing Faster Than They’re Opening
Legendary studios are not immune to this trend. Arkane Austin, known for Prey and the Dishonored series, is now defunct. Volition, the developers of Saints Row, and Riot Forge, which published innovative experimental games, have both disappeared. Ready at Dawn, the studio behind The Order: 1886 and several excellent VR titles, has also been disbanded.
Smaller studios and indie teams are also being hit, though they don’t receive as much media attention. Early layoffs were concentrated in North America, specifically in California and the Pacific Northwest, where major studios are clustered.
Now, we’re seeing cuts across Europe, significant reductions in Asia, and studios closing in emerging markets that were once seen as the industry’s future. When middleware and engine companies start contracting, it affects everyone building games on their platforms.
The Industry Keeps Pretending It’s Temporary
Company statements often frame layoffs as necessary restructuring, one-time events to realign priorities. However, the reality is that these so-called one-time events are ongoing contractions disguised in corporate language about strategic focus and operational efficiency.
Newzoo’s Global Games Market Report shows the industry earned $187.7 billion in 2024, up 2.1% from 2023’s $184 billion. Revenues are projected to reach $188.8 billion in 2025, a 3.4% year-over-year increase. While this is still growth, it’s not the explosive growth investors expected. The industry isn’t dying, but companies are cutting staff not because they’re failing, but because they overextended during an unsustainable boom and are now correcting.
Unionization Efforts Are Increasing
Unionization efforts are on the rise, with 57% of GDC survey respondents saying the industry should unionize. However, only 5% are actually in unions. Without collective bargaining power, individual developers have no leverage when companies decide to cut costs. The entire ecosystem is contracting, and workers are bearing the cost.