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Epic Games, the publisher of Fortnite and the Unreal Engine game engine, has announced the layoffs of 16% of its employees worldwide, which is approximately 830 people.
Tim Sweeney details the reasons behind the layoffs
Epic Games founder Tim Sweeney, addressed the situation in an e-mail sent to the employees, and shared publicly online. He explains that Epic Games has been spending “way more money” than the company earned, due to massive investments.
These investments are well-known and have been discussed extensively on 3DVF: Fortnite and Unreal Engine-related developments, external acquisitions to expand the Unreal ecosystem, and a shift towards the concept of the metaverse. Tim Sweeney reminds us that that Fortnite is intended to become “an ecosystem for creatives inspired by the metaverse” (a reference to Unreal Editor for Fortnite, which allows the creation and publication of experiences within Fortnite).
Sweeney expresses that he had hoped to move towards this vision without layoffs but acknowledges that his “optimism” was “unrealistic.”
He further states that while Fortnite’s growth has returned, it is driven by creator content, which generates less revenue for Epic than during the Fortnite Battle Royale mode take off. Indeed, it was this mode that had significantly boosted the company’s income, enabling massive investments.
Sweeney goes on to explain that before making this drastic decision, Epic had already attempted to reduce expenses in events and marketing, as well as implementing a “net zero” hiring policy (meaning a human resources policy aiming to balance departures and new hires). However, according to Sweeney, these measures were not sufficient to ensure “sustainable finances.”
Tim Sweeney also mentions that, in addition to the layoffs, Epic is parting ways with Bandcamp (an online store for buying and selling music, acquired last year) and SuperAwesome (a company specializing in online safety tools for children and teenagers). Their employees are therefore also leaving Epic Games, though without direct layoffs. This affects approximately 250 people.
What’s next for the former employees?
Tim Sweeney of Epic Games indicates that those laid off will receive the equivalent of 6 months of their base salary. Further details are provided in the announcement regarding specific points (health coverage in certain countries, stock options, 401k in the USA, visa support, etc.).
What lies ahead for Epic Games?
The statement aims to reassure both the existing teams and users of Epic Games’ products.
The message states that there will be no further layoffs, and Epic will continue to hire. However, the “net zero” policy remains in place, meaning any new hires will be offset by departures. And Epic will only hire people “for critical roles”.
Sweeney emphasizes that “about two-thirds of the layoffs were in teams outside of core development”.
He does, however, warn that some projects “may not ship when planned because they are under-resourced for the time being”. But Sweeney insists that it is mainly the business aspects that will be impacted, rather than the development of products and projects.
An admission of failure
To put it bluntly, Tim Sweeney ultimately admits that Epic Games’ leadership did not manage the evolution of the company correctly. Selling Bandcamp a year and a half after its acquisition clearly shows a lack of foresight and, in Sweeney’s words, an “optimism” that turned out to be “unrealistic.”
It remains to be seen what consequences this announcement will have on other fronts. For example, will there be changes to Epic Games’ very generous pricing policy regarding the use of its Unreal Engine, which is used for free by many artists, studios, in the animation and virtual production industries? What about the future of Megagrants, which are grants awarded generously to various projects closely or loosely related to Unreal (game development, open source, education, etc.)?
Answers to these questions will likely come in the next few months. We will, of course, continue to closely follow the topic.
