Epic Games is set to reduce its workforce by over 1,000 employees due to a decline in player engagement with Fortnite, part of a series of layoffs in the gaming industry impacted by economic uncertainties.
The company plans to achieve savings of $500 million US by cutting back on contracting, marketing expenses, and eliminating certain job positions, as CEO Tim Sweeney communicated in a message to staff on Tuesday.
Acknowledging financial challenges, Sweeney emphasized the necessity of major cost reductions to sustain the company, noting that expenses currently exceed revenue. Despite the resilience shown by prominent titles like Fortnite amidst the COVID-19 pandemic, overall engagement is dwindling, especially for live-service games requiring continuous costly content updates to maintain player interest.
Sweeney admitted to struggling in delivering the usual Fortnite experience consistently, attributing the current market conditions as the most challenging since the company’s establishment in 1991. He clarified that the job cuts were not linked to artificial intelligence concerns within the industry.
Earlier, Epic Games increased the prices of Fortnite’s in-game currency, citing rising operational costs. The company has not yet responded to CBC News for further comments.
This latest round of layoffs is the second major workforce reduction at Epic in the last three years, following a previous cut of approximately 830 jobs in September 2023 to enhance profitability. The exact percentage of employees affected by the recent announcement remains undisclosed.
While Fortnite maintained its lead in U.S. monthly active players across gaming platforms, the average playtime notably decreased according to Mat Piscatella, a senior director at Circana. Similar restructuring actions have been seen in other gaming companies like Electronic Arts, which laid off hundreds of employees and halted the development of a Titanfall game, as well as Amazon’s gaming division affected by broader job cuts last year.
The gaming industry faces additional challenges from rising memory chip prices, driven by escalating demand from AI data centers, resulting in higher semiconductor costs and necessitating console price adjustments.
