This week we're going to
cover more disheartening news as NCSoft has decided to cut up to 132
employees of the total 400 employees. Not only have they decided to
layoff a ton of their employees but so has EA joined the ranks in
mass layoffs. It begs the question, are the big AAA companies dying
off? Well, I have a theory...
Update from ArenaNet https://t.co/vl5WRxomHl— ArenaNet (@ArenaNet) February 22, 2019
Let's begin with NCSoft, the
company that developed games like Lineage, City of Heroes, WildStar,
Aion, Blade & Soul, Exteel, and Master X Master. Looking at this
roster, most of them are no longer running. And it is widely known
that WildStar's studio was shut down in September of 2018. Songyee
Yoon, the CEO of NCSoft West said in
this article, “Where we are is not sustainable, and is not
going to set us up for future success.” As such, the company plans
to restructure the company as well as merging ArenaNet and NCSoft's
publishing divisions. Unfortunately, no one knows how many people's
jobs will be affected. Suffice it to say, the projects they were
working on have not been smooth. ArenaNet has not had any new IP's
and therefore hasn't made as much money as they could be – a fact
that is quite noticeable to investors. The only point that has been
confirmed is the employees will
receive two months of severance pay plus a bonus based on the
time worked at the company.
About a day after the news
broke about NCSoft, EA's Australian studio FireMonkeys is also
undergoing restructuring. FireMonkeys was responsible for games like
Real Racing 3, The Sims: Freeplay, and Need For Speed: No Limits.
Right before announcing that massive layoffs are taking place for
this development studio, the project for Real Racing 4 was cancelled.
And while FireMonkeys has about 200 hundred people (according to this
article here), it is said that about 40-50 people lost their
jobs. Unfortunately, there doesn't appear to be any information about
their compensation packages, which is different from the other two
massive layoffs in the last couple of weeks.
In total, about 900 gaming
professionals between Activision/Blizzard, NCSoft, and EA are all
heading into the job market for positions. But what this massive bout
of layoffs says to me is that the AAA gaming industry is perhaps not
as sustainable as it once was. Gone are the days where these major
companies deliver a game in a full state without massive DLCs and
void of most game breaking bugs. And, many of these companies have
embraced a pay structure that is better suited to mobile games (ie
microtransactions) while expecting that their consumers aren't going
to care.
Why is this happening? Well,
I have a theory based on a friend of mine who posed a couple of
questions, “Why do you think investors are pulling out of gaming?
What are they afraid of or, what changed to make investors believe
that the gaming industry is not where they want to put their money?”
At first I speculated that maybe investors fear that article
11 and 13 copyright laws might be part of the issue. But now that
I'm thinking about it again, I wonder if the backlash of gambling in
the form of lootboxes might have their jimmies rustling. My reasoning
behind this thought comes from breaking news that released a couple
of days ago about the FTC
planning a public workshop on lootboxes.
Can you imagine? There is
going to be a workshop to illustrate how lootboxes work! Aside from
the fact that this seems like a ridiculous notion, what I want to
know is how long would such a workshop last? If it's anything over
about 10 minutes, I'm asking questions. And I think this workshop
most likely be directed at how gambling works and/or what to do if
children are sucked into this exploitative profit scheme. But this
also leads to the idea that without microtransactions gaming
companies will make LESS money. As much as I dislike the
microtransaction business model, they do offer game companies
monetary stability – a fact that is lacking when you consider the
total number of units needed to be sold in order to break even from a
games' development costs.
What I'm saying is, if AAA
gaming companies are forced to get rid of lootboxes and/or
microtransactions because they are perceived to be gambling, the top
companies would be losing a significant amount of income. And to me,
it feels like investors fear the worst and are pressuring the
companies for more profits OR are threatening to drop their
investments.
To tack on to that idea,
here is a wonderful article titled the 'Economics
of Microtransactions'. This article contains an important quote
when looking at an industry that has become dependent on this
business model:
“Game studios are now purposefully designing bad systems and
mechanics, hoping that people will be willing to pay to get past the
poorly-made parts of the service: when microtransactions are the sole
source of income, we start to build our entire product around that
model.”
Yikes. Maybe there is a
solid reason as to why hundreds of people are being let go? And it's
not because the people don't have value, but because companies fear
the loss of their cash infusions. (I'd also like to pat myself on the
back for last
weeks article where I stated that Bobby Kotick was only part of a
greater systemic issue...I still believe that firing the guy would
not solve the issue. But that's just me.)
Anyways, what do you think
about this speculation? Are the layoffs a reaction to investors
fearing that the gaming industry will cease to have monetary
stability?
Until next time.
Article by Susan N.
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