What Do Industry-Wide Layoffs Mean For You?

I've noticed a fairly steady flow of layoff and studio-closure announcements over the past six months, and very little in the way of promising startups or studio expansions. Electronic Arts (EA) recently announced another round of layoffs, leading to the expected speculation about studio closures around the world (especially in Montreal). In a market where video games continue to gain traction with new and old players alike, how can we interpret this counter-intuitive news? And what does it mean for professionals in the industry looking for work?

Lean Business vs. Bloated Payrolls
One constant in the layoff announcements is the focus on "leaning up" organizational structures in the industry. Let's face it, tech talent is not cheap, and the best software engineers come at a hefty price. Perhaps the expanding and saturated video game market is slowing down on it's support for multi-million dollar cash-cow franchises, and companies with huge payrolls are no longer seeing the payoff they once could.

Consider Blizzard's new development project, "Hearthstone," which I believe currently has a 15-person development team committed to it. Blizzard mentions in their sneak-peek trailer that they believe small, lean teams developing niche games is the way of the future. I've also heard this kind of language in numerous Kickstarter campaigns run by industry veterans (think Project Eternity). The concepts of lean business seem to be making their way into our industry (a bit late compared to others), and layoffs are an inevitable result of this.

In a nutshell, the concept of lean business is about employing as few people as possible, and owning as few assets as possible, while outsourcing all nonessential functions. This concept lends itself extremely well to a game-development studio or publisher. Think about things like community relations, customer support, tools programming, audio production, and testing -- all of these things can bloat a company's payroll, taxes, and insurance liability, when these functions could easily be performed by outside contractors.

Lean business models can provide a pathway to financial success for game companies. Unfortunately, when a bloated company tries to become lean, people are going to be hurt in the process.

Opportunities for Professionals
This trend may seem scary at first for industry professionals, but there is a ray of light in all this. At the end of the day, it doesn't take fewer people to make games in 2013 than it did in 2012. Therefore, a leaner payroll means that companies will need to hire more contractors than ever before. Let's say, hypothetically, that a AAA project at EA requires a 200-person team. Perhaps 175 of those people would traditionally be employees, and 25 would be contractors (arbitrary figures). If so, then perhaps their next 200-person project will include 100 employees and 100 contractors, or more realistically, 100 employees and three contractor companies that each put 33 people on the project. So, the opportunities for work are still there for experienced professionals, but the opportunities for "employment" are dwindling. Those laid-off professionals who look for entrepreneurial opportunities to leverage their skills as contractors may find more success than those who seek employment elsewhere.

I'm willing to bet that we'll see many more opportunities for independent professionals to find good work in the future, and at a higher price than they could fetch as an employee. The drawbacks, of course, are the absence of the corporate safety net -- the insurance, benefits, paid days off, bonuses and other employee perks. These are some of the very things that large companies are looking to save money on.

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Gamasutra: New, Significant Layoffs Hit Electronic Arts