Why Video Game Layoffs Aren't Done Yet I Extra Credits Gaming 

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Important context for the Nintendo execs taking pay cuts is that Japan has laws against mass layoffs like we’re seeing now.

In order to address cost of living, inflation and unemployment, we need to address executive salaries.

7:37 Two big caveats here; 1) Japan actually has decent worker protection, so unless the company was in danger of going under they can't fire their staff for "Whoops management fucked up" 2) Those protections don't extend to people not working directly for the company, thus lots of people *were* fired: they just technically weren't Nintendo employees

Sounds like the film industry. "Every movie has to be a billion dollar tentpole franchise move," says coprorate CEO who had no experience in the industry who ends up cranking out factory pressed big budget snooze fests while virutally killing the 20-60 million dollar film economy.

If we’re going to compare this to the video game crash of 1983 there were a lot of other contributing factors to that one including lack of originality, poor quality games, and oversaturating the market. This was also around the time that home computers were taking off, which could run many games better than game consoles of the day. Nintendo sweept up the market by focusing on giving players a good game experience and making high-quality games instead of just looking for easy money. I think many of today’s game studios have learned some of these lessons, but big tech companies have not.

I loved this video, but ending with what would Iwata do was a mistake. We can't rely on CEO's sensibilities or moral judgment. We need the strong labor laws that Japan has that are the reason why Japan companies don't have layoffs.

I heard Nintendo didn't fire tons of people because Japanese Law FORBID it, not because the CEO were actually people with empathy and a feeling of responsibility of their employees.

I remember seeing a post about a company laying off about 600 people and then turning around and giving their CEO a $20 mil bonus. Because being in a financial state where you need to lay off hundreds of people is definitely bonus-worthy, right?

On a lighter note, when you mentioned Snowcrash, my brain heard Snowpiercer, and I can absolutely picture a CEO watching the movie where the horrifically abused underclass violently rebels against their corporate overlord and the very structure of their society, and only taking away "hey a big train would be cool, let's make one".

I work in IT and have been laid off THREE times in the last six years since I got into the industry. It's baaaaaaaaaaaaad out there.

Have to mention that Nintendo does still have a large volume of contract workers who do not have the same benefits and pay as their full time employees, so those kind of cost saving measures where CEO's take pay cuts are coupled with contracts being run out or terminated early and don't translate to the same specific metrics done on layoffs most people find. Its a stealthy, more kid-friendly way to control your work staff, which to be fair does sometimes give the contract workers time to find work when they know their contract will end, but thats IF THEY KNOW.

2:11 "It all ties together." I wish people would realize how interconnected so many things are.

That human element is overrated. Many of the best things that happened to me were the direct result of losing my planned career, and winding up with a better career I wasn't even aware of. I no longer view jobs as 'life careers'. Instead, a job is like school. If you get verifiable work experience, certifications, linkedin connections with coworkers (and esp bosses), and real life experience... you come out ahead, even in the unfortunate even of getting fired without notice tomorrow. Losing a job is still nerve wracking and stressful, but if you plan for that eventuality from the outset, it's not a bad thing in the long run. For example, most of those game programming jobs that were 'lost' require the exact same skills that warehouse programming jobs require, and I can tell you that there are a LOT of openings in this field. I'm sure there are many other great careers out there, for anyone willing to look at the pay, benefits, and hours instead of chasing an imaginary dream job or prestige.

I find it "hilarious" that the same companies that complain "we can't give away free money!"(ie, better salaries, benefits and social programs) are the ones with their mouths fixed firmly over the near-0% interest rate free money pipe... >:(

You said in the beginning that the companies committing these cuts are large companies like Amazon, Unity, Embracer, etc. But that’s simply not true. Tons of A/AA and indies are laying people off in droves. VC’s and publishers aren’t investing in projects anymore. Publishers are going out of business because VC’s won’t find them. I worked at a A/AA company that had staff of almost 200 people that’s done smaller indie titles and worked with large studios like Nintendo. The beginning of this year. Projects were cut, and a lot of the company was laid off. It’s not just these massive juggernauts like Microsoft, it’s the entire industry that’s bleeding.

This is one reason why the 70 dollar price tag was disecuesed a few years ago

I work in mobile games, which I know this was focused on AAA titles, but we are also having massive layoffs for similar reasons. I think one other thing is contributing to this, however. During the pandemic, video game popularity went up cause we were all bored at home with nothing to do. The money we WERE spending on going out to eat, concerts, movies, etc. we were spending on in-home entertainment instead. I worked for 3 different companies since 2020, and they were super excited about growth and exploding and opening new offices and starting new app projects, etc. I think we grew bigger assuming the success would continue... and now that it's gone back to what it was pre-pandemic as far as how much people are spending on digital entertainment vs IRL entertainment... we're all getting screwed. Seriously just a few years ago job offers were falling out of the sky, it felt like. One company didn't renew my contract and I had a new job less than a month later that paid the same level. But now i've had to stop looking for jobs in mobile games at all and branch out to other fields (AI chatbot creation, for example) to find positions.

Video game crash of the 80's was caused by a flood of low quality games... the video game crash of the 2020 is being caused by a flood of low quality games.

I'll Never forget that moment with Iwata and Miyamoto. While sometimes I despise Nintendo's corporate decisions (not the games or devs: corporate) Iwata... he was a different kind of person. I was already amazed with his achievements as a developer and game designer, but that decision made me respect him so much. It was very sad to hear of his passing later that decade. It kinda reminded me to the time an ex-president of Sega (Isao Okawa I think?) donated everything he had in his will to Sega, which allowed them to survive as a third party company to this day.

I don't think I agree with the final point of games industry going away from big tech. This feels like just game industry mirroring the boom and bust cycles of big tech, that happened with crypto, NFTs, will probably happen with AI, and is just almost par for the course in big tech nowadays. or maybe I'm just extremely jaded, only time will tell and I hope I'm wrong

As someone who worked for Netflix in the 90s, all of this has happened before, all of this will happen again. Same as it ever was.

Thank you for explaining corporate economics and why interest rates are connected to inflation. I'd not really understood that before.

This is also a reason to form unions.

Great video! Very well done breakdown of the current situation with the industry. Also, bonus kudos for mentioning Snow Crash and NOT Ready Player One.

There's just not going to be a 1980's style crash. It could happen then because it was a niche industry with a massive barrier to entry. What's mostly happening is the big studios trying to buy success and failing. The massive, extremely expensive AAA games are not that much better looking than cheaper alternatives. Simply having a game that's big is no longer a selling point. Just look at the recently released games with the most buzz. It's mid sized studios like Larian and Arrowhead with Baldurs Gate and Helldivers and it's small and indy dev with Palworld and Lethal Company. And that alone would ensure the industry as a whole would survive, because we objectively don't need the AAA games... but in all honesty the AAA games aren't half bad. Sure you have your forgettable and overhyped titles like Diablo 4 and Starfield, but Spiderman was really good. Resident Evil 4 was great, Jedi Survivor was rock solid, Armored Core VI was pretty amazing, do I even need to point out how good Tears of the Kingdom is or how well Streetfighter 6 is doing. The stuff that's disappointing is largely the cash grab, trend chasing, millionth installment soulless garbage that nobody should miss. It's really horrible to say, but from a consumer perspective, getting devs out of big studios where they're forced into wasting their time on that nonsense is 100% going to produce some amazing games. Mark my words, 2026-27 are going to be absolutely filled with amazing maiden projects from new studios born out of this mess. If it was the gambling simulators and the live service ripoffs that are left standing I would be feeling gloomy but I don't remember being quite so spoiled for choice in terms of fantastic games and I don't see the good times randomly stopping because talented people aren't making games designed in board rooms and with focus groups.

all of the major recent layoffs started just after I locked in my uni applications for game design and its honestly left me so scared for the future

The problem isn't the layoffs, but the hiring frenzy. Hiring tons of people fast is only possible by lowering your standards by a lot, so when the bubble bursts, you have a lot of employees not worth keeping. But if you keep your high standards and have well functioning dev teams with a lot of experience, layoffs really hurt, you likely never fully recover from them, so it's far better long term decision to cut costs elsewhere. If you have someone still learning the ropes, but getting paid a lot due to the recent labor shortage, you save a lot and sacrifice nothing. But if that person has been at the company for 10-15 years, helped to build everything you have, and get paid less too (switching jobs usually gets you more money), then letting them go is like cutting off a limb for no reason.

Remember when Iwata took a 50% pay cut so he won't have to layoff any employees in Nintendo? Pepperidge Farm remembers.

As I teach my econ students, in a properly functioning economy, capital absorbs risk. That’s what profits are for: to create the buffer that allows firms to continue to employ & produce through hard times. If owners (and the C suite) aren’t insulating workers from this kind of volatility, there’s no social justification for them to keep the profits from good times, either! Proper incentives mean whoever pays for losses should keep profits, and it’s heartening to hear that Japan has incentivized the right behavior.

Just look to Arrowhead Studios CEO in response to issues with their game Helldivers 2 proclaiming that they will not just hire a whole bunch of extra devs to work on and stabilize the game just to then fire them after the issues have been resolved, and that's somehow such a profound statement to make.

The greatest fear I have in post-modern capitalism is that desire to always see a number go up, even if you have to cut jobs or make other short-term choices. We need to normalise “success” as including no growth or overall growth over a period of years. Also stop cutting the mid tier people with lots of experience! They’re not the problem, they’re usually the only ones keeping afloat.

Thanks for explaining all this. Economics aside I was wondering how many people are on AAA teams. Especially when Game Freak and Sonic Team are very small for the major IPs they have

Before even watching the entirety of this video, the answer of if we are looking at a crash even vaguely similar to the 1980s crash is "No!" Anyone who thinks otherwise has absolutely no idea how devistating that actually was.

Nintendo cutting executive compensation was essential to keeping the company alive. If they did massive layoffs they would have sent the company into a death spiral where smaller teams would have to make even better projects. This could have damaged the Switch launch and killed the company. Instead the recovered because the quality of life at the company was maintained and the top brass got to their money back when the Switch literally made ALL the money

tl/dr - tech CEOs pulled a Cave Johnson and now a bunch of video game companies got Apeture-ed

I tried to think of business model for game development since over 10 years ago. At first it was similar to normal company's R&D with cheap employees to build the game. Then all I could see is that it's better to have a small team of highly skilled people and outsource the parts where you could. The problem with the current gaming industry is the people at the top are far from being skilled or have great vision toward videogames. Y'know, it's hard to have Kojima or people of the same caliber in every companies. Insider info said that many skilled people got ignored by managers while the board only cares about profits.

as much as i wanted to, this is pretty much the reason i chose not to get into game development. tie all these issues as well with my lack of confidence in my skills and it creates a situation where working in the games industry just didn't feel like I would be competitive enough to have a stable living. Would still love to get in the industry somehow someday but I honestly don't think I ever will outside of a passing hobby and even then it's barely a hobby as honestly i have more fun just playing what other people have created. Unfortunately even my second choice is proving difficult to get into despite all my efforts already too, so it might not just be the games industry having issues, we just happen to notice that industry more due to our passions for said industry.

AAA games haven't delivered, indie games have been great, and these companies spent money hiring way beyond their means and paying consultants oodles of money to generally make their games worse. It's no surprise layoffs are starting to hit.

Alternative take. The AAA industri is mostly shoveling garbage out anyway. Its sad people are losing their jobs. But positive that room is created for the AA and indie games.

The rise of independent game developers for the last 20 years, mobile gaming and stream gaming has giving competition to AAA game developers. Also. AAA game developers has gotten greedy with there only internet-based gaming and micro transactions. 6000 people are getting fired from Sega, Nintendo, Microsoft, Bungie.

Nintendo’s Execs are like the GOLDEN STANDARD for what Executive Leadership should be like. Their legal department could use some work catching up but they have done close to no wrong in every other field.

Man, it has been quite a time since Iwata passed away. Hearing his example is quite exemplary.

The other element you didn't mention is the massive financial cost for boneheaded executive meddling in the creative process. As you said, they play the stonks so games are being designed to exploit fads within the financial and investment industry (eg. NFTs) even when your consumers (the players) have utterly no interest in what is beung put into the game. The result is the destruction of popular brands (ie. Star Wars, FIFA, Mass Effect, ect..) and studio reputations because the point was to give a temporary boost to stock value rather than making great games or preserving the value of an IP. These losses then have to compensated for by not just closing the studio, which the corpo forced into making a bad game, but also unrelated parts of the business because the cost of development far outweighed the expenditure of the staff the studio employed. In the end the solution is simple, studios should NEVER sell out to or be partly owned by corporations. The games industry has not benefitted from development costs inflating to hundreds of millions of dollars. This is proven by the rising popularity of indie games which are made for a fraction of the cost and while studies by the likes of Humble show there's an unreasonable bias within console gamers against indie games this can be overcome with time and marketting to break this mentality that AAA games are of innately better quality than indie games.

Basically, investors threw money at an industry they did not understand or have a plan on how to make profit.

You need only look at Shakira Miyamoto or the late great Satoru Iwata, or read A Tale of Two Cities to realize how to handle company downsizing, namely if there are cuts to be made, you start at the top! Isn’t that right Madame De’Farge?

7:57 I audibly laughed at the prospect. Not a chance in 7 separate Hells our CEOs would take that kind of a hit. They'd sacrifice infants into a volcano before they scarified their salaries.

07:44 A reason they did was that Japan 🇯🇵 has good worker protection laws on how you can fire people.

The firings will continue until c-level exec bonuses improve.

I appreciate the perspective of getting the bigger picture on why video game layoffs are happening!

In addition to many people's notes about Nintendo and Japanese labor laws, it's also important to note that an unusually high number of Nintendo corporate executives are internal company veterans who have literally made games and hardware; largely as a result of Japanese corporate culture favoring internal promotions. Even then within only a few decades their board is slowly filling up with the usual collection of lawyers and investment professionals as dev work gets outsourced to partner studios and individuals have less and less personal contribution to each new title.

The worst part is it's everywhere, not just the gaming industry.

PANR has tuned in.

Lots of smaller developers that publishers contract (to make all or part of a game) have been getting decimated lately. Especially when big game companies are slimming up and investor money has evaporated. Also, when a company is bought by another, only the name lives on. Sure they may have to hire all the employees but that is also normally for only a set amount of time (think 6months-1year). That original company is dead. It has a leg up on restarting but to act like 'everything's okay' just because the new company keeps using the name people like... People use "fiduciary duty" as an excuse to do a-moral things. For those caught up on Japan's legal protections... even given that, they could have cut people's pay instead of exec's taking less money. Japanese culture always seemed to take being a leader seriously... complete opposite to people making sure to maintain their 'fiduciary duty'.

We need a UBI so people laid off don't have to worry about their entire livelihoods being at great risk out of nowhere.

And is looks like Hasbro, after firing many employees, is going to concentrate more in video games than toys, Magic the Gathering and D&D. 🤷‍♂️

Honestly this localized collapse of the AAA segment was long overdue. Like yeah the economic factors are a major catalyst behind the ongoing inferno, but lets not pretend things were going peachy before it either. The AAA segment increasingly became this weird landscape where the focus shifted away from creating truly entertaining products, towards these futile attempts to create Skinner Boxes "Services" as a substitute. All the while Ignoring how such services have fundamental issues and limitations. Also as some pointed out. What Nintendo did was done in large part due to corporate (labour) laws which put the burden of responsibility onto the higher ups. Make no mistake though. Anyone that could technically be fired by nintendo like contract workers, where fired and they would have fired even more if those laws weren't in place. It is arguably another example as to why Labour Laws are so bloody important.

Love your content guys 😊😊😊❤❤

The mass layoffs help pad the bottom line and continue the fiction of infinite growth. Frankly it wouldn't surprise me if a lot of the big companies either implode, or divest themselves completely from the space all in the interest of more short term profits. Meanwhile all the smaller studios seem to be doing just fine? Could make for a big shakeup in the space and more indie groups.

Iwata should be the patron saint of the Videogame Industry. And Miyamoto... he already is our hero.

Ehh it wasn't 0% interest loans, it was very low but that from the FED to the consumer banks for generating the loan capital in the first place, those banks pass on an operating cost in the form of NIM. Loans always had a cost, it was 3~5% APR of the debt. The thing with corporate debt is you don't pay on the principle and instead only have to pay the interest, as long as the companies growth was higher then the interest payments then it was a positive exchange. I borrow at 5% to expand my business and generate 10% growth, that is a 5% net profit. Of course if I get less then 5% growth then it's a bad exchange. As long as I have enough revenue to cover the interest payments and operating costs, then I can continue doing this. Once I can no longer do that, then I start having really big problems and need to either generate more revenue or cut operating costs. People are by far the most expensive part of operations, we cut costs by identifying product divisions that are negative revenue and shutting them down while keeping the Intellectual Property (growth) they created.

There's been predictions of another video game collapse going on for years now, but it hasn't happened. I'm actually wondering if it can't happen at this point. For one, the fee to pay/live service/microtransation model that infects games these days seem to be able to put out such a large amount of money that its almost impossible to fail. We see so many of these games attempting to work on mobile, and ultimately failing after less than a year, but they keep coming for some reason. If they weren't making money, why would companies like Zenga, Square etc keep pumping they out? I think they do end up making some money short-term, which is why they keep coming, looking for that one combo of factors that can create the next Fortnite. For two, even with tentpoles like Madden, FIFA and CoD gradually getting worse year on year, its not like they're ever going to stop making them, or the games are going to stop making money. And the publishers know this and don't care if they're if their of bad quality because their core audience will always buy them regardless. My view is that The tcollapse of the 80's happened because gaming was such a niche hobby that it didn't take much to cause the bottom of the market to fall out. Nowdays, gaming is so mainstream and has such a large userbase that its almost impossible for an enthusiast boycott/protest/lack of interest to have the same effect.

I don't know what you are on about in this video. Few things are more interesting then interest rates. I may or may not be an economist.

And another game with near exact theme got 1mill+ accumulated players(from both playstation and pc)in a month I have never EVER been Happier

Fixed term contracts for employment would be really helpful in both heading off this reckless hiring and giving advance notice to employees

for those w/o sponsorblock, video ends at 8mins 20s

i like how you show a lot of layoff is for PoC and similar DEI peoples , but do not tell it out right

While the lay off are terrible, it does have the benefit of getting people into new studios or studios that are taking more appropriate risks. Im hoping this will lead to less samey game and more ethically run studios.

The government made it easy to subsidize game developers then the government stop subsidizing, and now there’s a loss those darn executives

7:40 Yes that is absolutely something more companies in general (not just gaming and tech) needs to do more of. However I only ever hear of Japanese companies doing executive pay cuts, and not all of them do that either.

Man, its just bad decisions and nothing related to bad economy. I work in the game industry.

You can't cut executive salaries to deal with large employee pools that have never been profitable and will never be profitable. Nintendo took a risk that failed, but the core business model was sound, and they knew that the company would need its employees once it recovered. It's a different situation.

Good. Layoff the entire industry and start over from scratch at this point.

And this is why some minor Indie companies, try to make sure they don’t do layoffs, if they wish to stay afloat. Since they can make some money back. Sadly, not all companies will do this, like Ubisoft and others that we know. Beside those who did the third Baldur’s Gate. Hence why they took their time on it.

Great video, thank you so much. Haven't seen anyone sum up the issue that well. It's a difficult /shitty time to be in games but the reasons are utterly in the corporate space. When your product becomes entire companies there is little room for humans.

i hope that game companies especially game freak take longer to make higher quality games instead of pumping out yearly installments that are rushed and buggy

They over invested because they thought gaming was an infinite money generator. We are not your lemon to squeeze, corpos.

Yeah, I definitely have my gripes with how Nintendo does things sometimes, but there's no denying that the executive pay cut was an absolute W, top-notch move.

> 6:11 "I'm really starting to believe this whole CEOs are the easiest thing to replace with AI theory" I like that idea. It definitely couldn't be worse than the current big-tech/game-industry CEOs.

Welp that sucks, and companies like Sweet Baby Inc aren’t helping.

was in the first wave, oct 2022 (Not gaming, but was the first big round of the tech layoffs)

gosh i do love a good video about interest rates

If they keep hiring consultants like those of Sweet Baby Inc yeah expect to continue to lose money.

The things that is so aggravating about all of this - if you're an executive and take a gamble, you should also take the responsibility. Just saying you take responsibility and then just laying off people just doesn't cut it. Asides from jobs that is.

I don't think it's fair to compare Nintendo with 0% interest loan bets. Nintendo's leaders cut their salaries not just because it was the responsible thing to do, but because the company was all they had. If the WiiU and 3DS failed, Nintendo would collapse. (Fortunately the 3DS was a huge success, enough to keep them afloat). When companies like Amazon are taking bets to create games, they don't owe employees a job forever. It's a bet, a startup child for experimentation. Some of these bets will win, and new permanent jobs will be created, while other bets will lose. The issue isn't with the companies. We all want businesses to take risks, expand and grow so that we have more jobs in the market! But that means we have to take a certain risk as well when joining these companies. Just remember, these jobs didn't have to exist in the first place. There will be ups and downs.

I thought it was the Japanese Business laws that made Iwata and Satoru go the direction of salary cuts? That the Japanese Business laws stated a company must attempt all avenues to reconcile down turns before attempting to layoff employees.

Dei money has played a part.

Not interest rates, not AI... it's section 174... Remember how Amazon and every other major company paid like $0 in taxes? The trick was, any profits were spent on R&D (software, new factories, new products, etc) each year before tax time rolled around. Why give money to the government if you could just spend your profits on yourself and say you made no money? Well, new tax code went into effect just when all the major tech layoffs were happening,... so you can't do that anymore. If you hire someone domestically, you can write off 1/5th that amount in salaries for R&D (especially software development) if the worker is domestic, or 1/15th that amount in salaries for R&D if the worker does not reside in the states. And just like a fart in the wind, all major companies cast off any and all nonessential developers, and all new software companies are unable to find investors... If you started a company today, and paid 10 devs, 100k each for one year to develop something that made 1 million bucks... you would owe uncle sam $800k, instead of $0 (which is what you have in the till - as you didn't actually make any profits after affording your workers). This is why devs of all sorts are out of the job and can't find another.

The bad timing around the Rooster Teeth news :(

Thanks again

Great vid. Also, just an FYI, you've come a long way hosting this show. You're doing great! It feels like you've found your groove. Great job.

I was laid off at the end of last year, and im about to get my degree in a few months, and all of this has me pretty nervous.

the real reason is corporate greed

I wonder if this will lead to some pretty great new indie studios. Here’s hoping.

In gaming speak, the big guilds are flailing in the face of the patch changing the meta after leaning on exploits and beneficial bugs. Failing in the face of actually having to play the game as intended.

Blackrock money is drying up.

A lot of companies mad a lot of bad decisions with risky bets, and the people are paying the cost, while companies walk free, and will do the same mistakes again. It's not fair, and it's not right. I think it's time CEOs learned that they're only human too, with online and real world presence; they have faces, and houses. If everyone in a company walked out of a workday, for just one day, the losses for the company would be so big (especially if it's announced WHY they're walking out), that CEO's would sh*t their pants. Especially since it can be done a second and third time, without giving them the benefit of being prepared for a massive loss.

So one major source of this issue was forgetting that if it looks like free money, it probably isn't sooner or later~

Great content

I miss Stadia. I loved it. I owned 70% of the games they offered when it closed down.