In a memo and subsequent blog post on Thursday, CEO Tim Sweeney confirmed that Epic Games was facing financial challenges. He attributed these challenges to overspending and having unrealistic expectations regarding revenue from their metaverse-inspired initiatives. Sweeney acknowledged that for some time, the company had been spending more than it earned, with a focus on investing in the growth of Fortnite as a metaverse ecosystem for creators.
To address these issues, Epic Games had already been implementing cost-saving measures in various areas, including marketing and events. However, Sweeney stated that despite these efforts, layoffs were necessary to achieve financial stability. He admitted that he had previously been hopeful that the transition could be managed without job cuts, but he now realized that this was not realistic.
Sweeney also highlighted how Epic Games had entered the creator economy sector, allowing players to create and sell their own in-game content while sharing 40% of the revenue with the company. This move had contributed to the company’s recent expansion. However, it had also resulted in narrower profit margins, impacting Epic’s ability to sustain its workforce due to the comparatively lower earnings from the creator content revenue-sharing model.
“Success with the creator ecosystem is a great achievement, but it means a major structural change to our economics,” Sweeney said. “We concluded that layoffs are the only way.”
Epic Games Sells Affiliated Businesses and Announces Layoff of 250 Employees
The video game industry has faced challenges this year, with major developers and publishers like Epic Games, Riot Games, Ubisoft, and Activision Blizzard making significant staff reductions. Financial difficulties have also led to the closure of smaller studios like Romino Games and Volition.
BioWare and Firaxis Games recently carried out layoffs to streamline operations. BioWare let go of around 50 employees, while Firaxis Games had to say goodbye to approximately 30 staff members.
Sega made a notable decision to cancel its upcoming multiplayer sci-fi FPS game called Hyenas, along with several unannounced titles, as part of “structural reforms” in its European operations. Layoffs are also expected at the game’s developer, Creative Assembly.
In addition to the layoffs, Epic Games has decided to sell Bandcamp, a music marketplace it acquired just last year, to Songtradr. The exact amount of this transaction remains undisclosed.
Furthermore, Epic is divesting its marketing company, SuperAwesome, known for creating safe online experiences for children. This entity will now operate independently under the leadership of its current CEO, Kate O’Loughlin.
As a result of the sales of Bandcamp and SuperAwesome, Sweeney stated that approximately 250 individuals will no longer be part of the Epic Games team. To support affected employees, the Fortnite producer is offering six months of upfront salary. Additionally, impacted employees residing in the United States, Canada, and Brazil will receive an extra six months of paid healthcare coverage.