Wednesday, May 23, 2012

Why are there so many layoffs in the Game Industry?

Again, this isn't so much a secret as a good piece of information to know. I know quite a few people know this but for those who don't it helps you get a better picture of what's going on.

For years now Development teams have been getting bigger and bigger, and the reason for this is they want to be able to release games quicker so they can get to market and capitalize as soon as possible. What happens is the higher-ups decide to hire a big staff for a game (usually AAA games but it happens in varying degrees to all Developer companies) to get as much done as possible.

Doing this over-does the budget for employees and makes games cost much more to develop. The way they offset that is Two (2) Ways:

1) They hire a lot of Developers as simply "Contractors" instead of Full-Time Employees The reason for this is because they don't have to pay extra for Medical Insurance or pay into Social Security/Medicare/etc. taxes since the "Employee" is technically Self-Employed, meaning the worker has to pay more taxes with no benefits.

2) When the game is finally finished, the higher-ups cancel the contracts with these "Employees" so that any sales they get with the game won't be negatively affected by additional payroll, thus improving the profit margins.

As I said, it's not a huge secret nor something that's a new idea, but as I said before the Gaming Industry is MY industry and I love it so that is what I focus on.

12 comments:

  1. Thing is, it happens in every industry with surplus workers.

    Too many want to work in the game industry. Too many accept bad conditions. It will only be better with a good union AND when people realize making games is not fun like playing games. Then and only then companies will try to retain good workers.

    Trust me, I know the pain. I used to work with advertisement, it's the same crap. Now I work with marketing while I study law to finally get away from that kind of industry, cause it sucks to the empoyees.

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  2. I just got done reading all your articles. I thought they were good. I didn't even know why game companies delay releases like they do. Good info!

    I am ashamed to say I bought Diablo 3 as I am a huge fan of the genre and of Diablo, but the always online deal is a real bummer and doesn't deserve my dollars. Also, I am already getting rather tired of playing it. I grew up playing video games, and while I maintain a healthy lifestyle apart from gaming, every once in a while I see a game I feel like I "have to have" which doesn't happen very often anymore.

    I know so many people who live for playing video games. Most don't have jobs. Most don't even take a shower but once a week. It used to be sitting in front of the television. Now its gaming. I'm no psychologist, but some addiction inside our brains is what keeps people spending so much money on things they don't need. I hate to see the vision of the future portrayed in "Idiocracy" come to pass!

    Great articles. I will keep my eye on your blog for more!

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  3. This is also the issue, the cost of the games. Though people want to say it doesn't match inflation, they're obviously ignoring the economy and unemployment numbers which has a huge impact on entertainment budgets for the average household.
    Though I agree about the size of teams, what makes matters worse is the salary costs to hire "the best talent" is also making huge over head costs balloon up.
    Game companies instead of being conservative with their budgets for salaries and staffing are throwing all their eggs into the basket that their game has to do big AAA sales to be profitable, which is ridiculous.
    Look at any Indy developer or garage developers. They work on a good title for much less and not expecting a major hit, thus they're profitable even with what most would consider a "B" title. And when I mean "B" title I mean sells 450-900k units. Which if you go by historic numbers is still really really good. It's just that every company wants the next Call of Duty with their title so they keep spending more time and money and thus make it a huge gamble. Instead of spending less time and money and make a decent title (even an original title) and still make a profit.

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  4. Bigger staff for 1 year or smaller staff for 3-4 years...
    Doesn't change that much in the end. Conditions seems **** in the gaming industries but in the last 20 years UNION'S have bring has much bad things as good things.

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    Replies
    1. The problem with big staff for 1 year instead of smaller for more is that at the end those Developer's are now out of work and have to sit through the anxiety of trying to find work. It does mean games can get released sooner but it's a double edged sword.

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  5. Hired Guns... Although it's upsetting to hear that many of these people can't find stable jobs doing the thing they love, it's sadly not the only industry that does this. Sometimes mid-way through a project a dev company will realize that they're way too understaffed to reach the time constraints put on them. So they bring in these "hired guns" to fill the gaps, but don't feel too sorry for them, because if they're really good at their job, the company will find a more permanent position for them at the end of their contract. Not a whole lot different from a probationary period, it helps the company weed out the weak links

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  6. Those extra "hired guns" are very unlikely to stay on-board permanently, regardless of their performance. Developers will hire on additional staff during "Crunch Time" to get the game done but gladly fire them when it's done to reduce the effect on the bottom line.

    Whether they're good or bad they'll likely all be let go because of budgetary reasons.

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  7. Can you please explain what royalty is? I know dev's get paid royalty so what is it?

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    Replies
    1. http://en.wikipedia.org/wiki/Royalties

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    2. For example "That 70's Show" plays the song "In the Street" during the intro to every episode. The Producer's would then owe money (royalties) to the artist who created that song every time an episode aires, which is I believe "Alex Chilton and Chris Bell of the band Big Star."

      Another good example would be the Unreal Engine 3. Every time a developer utilizes the engine for creating their games graphic's; they owe the company that created the graphics engine, which I believe is Epic Games.

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  8. I hire some people to mow my lawn during the spring and summer and end the service in the winter time since my lawn stops growing. Should I keep them on board during the winter even though I'd basically be paying them for nothing?

    That's the situation with contract workers in *any* industry. Use all the sensationalist language you want, but letting surplus workers go makes good business sense. If you don't do that, everyone might lose their jobs when the company runs out of money. It's business 101, really.

    Never mind the contractor stuff--that's old news and has been going on in nearly every industry since the term "worker" was created. all the layoffs happening recently are a result of growing pains in the industry. New/shifting audiences, new mediums, new distribution channels, and yes, even adjusting to used game sales and the modern ease of piracy (which gamers want to bury their head in the sand about). It's a chaotic time, and it's not just contractors getting purged (which happens every time a game ships). Full timers are getting let go in droves, too.

    This article is too simplistic and simply aims to paint developers as "greedy". The real reason the games industry is bleeding workers as of late is a much more complicated story.

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    Replies
    1. Obviously you missed the point and don't know a thing about the Game Industry. While you have been developing your "theories" I have been WORKING in the Industry and IN THE BOARD ROOMS.

      Your ignorance is astounding sir and it is highly recommended that you stay away from talking about Real-World issues since you don't even have a grasp on the simple ones.

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