What is going on with layoffs in the video games industry?

Zelda: Tears of the Kingdom shipped 10m copies in a weekend. Hogwarts Legacy sold 24m units in a year. Palworld is on 25 million players. Spider-Man 2 was Sony’s fastest-selling game. Starfield broke Bethesda records. And then there’s been Diablo 4, Super Mario Bros Wonder, Baldur’s Gate 3, Star Wars Jedi: Survivor, Resident Evil 4… sales records have been broken consistently over the past 12 months.

But then there have been those other headlines. You’ve seen them, too. 860 layoffs at Epic. 1800 redundancies at Unity. 1900 by Xbox. 900 by PlayStation. 530 at Riot. Nearly 700 at EA. I would give a running total of how many people have publicly lost their jobs in games over the last year, but the likelihood is that by the time this article comes out, the number will have gone up.

What the hell is going on? The answer has multiple facets to it, and to fully explain I need to take you back to 2019 BC (Before-Covid).

The pandemic boom

In 2019, the video games industry was strong and growing. PlayStation 4 and Xbox One sales were starting to fall, as were console game sales, but that was because we were approaching the end of the console cycle. It was all very normal. And declines in the console space were easily being made up by mobile games. According to data firm Sensor Tower, the global mobile games market grew 13% in 2019.

All of this attracted investors into games, who spent money hoping to find the next big hit. But then 2020 happened, and video games exploded.

Due to lockdowns, PC and console game sales grew by as much as 50 percent in certain territories, per data from chart numbers firm GSD. Mobile games revenue grew 26 percent worldwide, per Sensor Tower. In 2021, PC and console sales fell a bit – although only a bit, and partially impacted by PS5 stock shortages. But mobile gaming grew again, this time by over seven percent.