The Axe Drops on Gaming’s Acquisitions Gold Rush

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2023 is being touted as one of many best years in gaming. With main releases like Zelda: Tears of the Kingdom, Spider-Man 2, and Starfield coming from the massive three publishers, plus loads of third-party hits, there are extra nice video games this 12 months than we all know what to do with. Meanwhile, there have been near over 6,000 layoffs throughout the video games trade in the identical time, impacting firms like Bungie, Epic Games, and extra. But the first purpose for the large variety of redundancies isn’t due to one thing that occurred within the final 12 months, however a development that’s steadily grown for the previous two years.

In 2021 the most important online game announcement wasn’t a brand new sequel or shiny new title, however as an alternative Microsoft saying its plans to accumulate Activision Blizzard for $69 billion. Indeed, the most important information tales from 2020 to 2022 have been much less about what video games have been popping out (if something they have been all being delayed) and extra about which studio was the following to be purchased. During the Covid years, mergers and acquisitions have been the following large factor.

Take Embracer for instance. It made buying firms an enormous a part of its model, a lot so it appeared prefer it acquired extra studios than it launched video games. And for a time that technique labored – Embracer may not be a family identify but it surely actually took an outsized share of headlines in 2022, first with meme-worthy acquisitions like THQ that led to folks all of a sudden caring rather a lot about Destroy All Humans, earlier than transferring on to large fish like Tomb Raider developer Crystal Dynamics and Gearbox, the studio behind Borderlands. It additionally acquired the online game rights to The Lord of the Rings.

Mergers and acquisitions (M&A) nearly at all times result in layoffs and workplace closures.

But ask any enterprise analyst and so they’ll say mergers and acquisitions (M&A) nearly at all times result in layoffs and workplace closures. A fast Google additionally offers the identical reply. So fast-forward a 12 months and, after years of growth, Embracer’s future isn’t trying fairly as vivid. The Swedish megacorporation introduced it’s completely shutting down Volition, the historic studio behind Saints Row, and is exploring choices for Gearbox, doubtlessly promoting the Borderlands developer for $1.4 billion lower than three years after it was acquired.

Embarcer is, for all intents and functions, at floor zero for every little thing that might go mistaken with an M&A. As it seems, the corporate hoped to land a $2 billion funding (later reported to be the Saudi Investment Fund) to assist make its spending spree make sense. That deal by no means went by means of and the sudden lack of $2 billion meant Embracer needed to shortly jettison a few of its pricier purchases. With Volition gone and Gearbox seemingly following go well with, if I have been Crystal Dynamics I’d be thanking Amazon for inking a deal to provide a bevy of films and exhibits primarily based on my most well-known online game character.

Even Epic, which has loved monumental success with Fortnite, has made layoffs: a major chunk of Fall Guys studio Mediatonic, which it acquired in 2021, have been let go this 12 months, plus it offered Bandcamp, its music storefront, regardless that it was solely acquired in 2022. Bandcamp was offered to music advertising and marketing firm Songtradr, which then proceeded to put off its workers. And lately Bungie — which was acquired by PlayStation in 2022 for $3.7 billion — made near 100 layoffs throughout key divisions like artwork, music, QA, advertising and marketing, and group.

Of course, not all of this 12 months’s layoffs have been the results of acquisitions; Ubisoft, BioWare, Team 17 and Creative Assembly have undergone layoffs as a part of cost-cutting measures. But in case you’re questioning why there are all of a sudden so many layoffs within the video games trade throughout a time of such strong releases and monetary positive aspects, the timing between the final two years of acquisition sprees and this 12 months’s cutbacks can’t be missed.

The acquisitions rush of the Covid years have been at all times going to be a double-edged sword.

As large information as acquisitions are, they’ve traditionally include penalties, which made the previous couple of years’ back-and-forth between PlayStation and Xbox over which firm may purchase extra studios surprisingly grim. For amidst the thrill of questioning what Xbox may do with Activision Blizzard or PlayStation with Bungie, loomed the data that M&As don’t finish nicely for all workers, it doesn’t matter what their new father or mother firm says.

Looking again, the acquisitions rush of the Covid years have been at all times going to be a double-edged sword. M&As are a messy enterprise with each good (potential collaborations, security for some groups) and dangerous (layoffs, layoffs, layoffs), and we’re seeing the dangerous rather a lot in 2023.

It feels particularly callous for thus many layoffs to occur in a 12 months when video video games are shining so brightly, and the layoffs are sabotaging what ought to be a feel-good 12 months for video games because the trade bounces again from two years of the pandemic. Laying off workers simply because the video games they’ve toiled on are being launched is especially grim.

The silver lining in all of that is studios like CD Projekt Red, that are making ready to unionize to stave off any potential layoffs, and that feels particularly warranted given the success of Cyberpunk 2077: Phantom Liberty. Teams throughout Activision, EA, are making ready to unionize as nicely. Whether it will enhance the video games trade is simply too quickly to say, but it surely’s nice to see the employees within the trade try to wrestle some energy again for themselves after such a roller-coaster 12 months.

Matt T.M. Kim is IGN’s Senior Features Editor. You can attain him @lawoftd.

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