Do you have thoughts on what’s causing all the layoffs recently? I have

In some cases (like Microsoft) there's a significant corporate investment into AI but this does not apply to most publishers (Ubisoft, EA, Sony, etc.). Most of the situations are for a pretty simple reason completely beyond anyone in the industry's control - inflation had gotten very bad in 2021 so the US Federal Reserve raised interest rates to stop the inflation.

As you can see, the inflation rate was rising super quickly until shortly after January 2022 when the interest rate started rising. Inflation fell, but the interest rate increased the cost of borrowing and that made a lot of companies suddenly look toward profitability instead of growth at any cost to keep their financials looking good to investors.

Costs had also increased on many games in large part due to the massive ramp-up in hiring 2021-2023, in hopes of chasing the massive pandemic video game engagement spike. Unfortunately, as lockdowns ended and people returned to their normal routines, so returned video game engagement levels mostly to their pre-pandemic levels. Massive expansion plans that investors demanded during the pandemic boom ended up as money-losing affairs, especially when rate of return is compared to putting money into government bonds earning 5% guaranteed. It's a lot easier to stomach the risk of failure or breaking even when the guaranteed rate of return on a US Treasury was only 0.25%, but when it's 5% that's a very different decision.

This new calculus basically drives everybody to take a hard look at their finances - lenders are significantly less willing to float loans to studios or publishers now than they were before because of the interest rate, so studios and publishers can't get cash infusions to cover development when they used to. Larger companies like Microsoft and Sony are looking to improve their financials because investors now want good financials instead of big growth. The leading costs of game development are developer salaries, so that's the prime place to cut costs. Even if we were to cut the EA CEO's annual salary from $30 million to 0, that wouldn't pay for more than a few months of Dragon Age: The Veilguard's multi-year development cycle, let alone the rest of EA's games in development. The rising costs ran headfirst into the rising interest rate and that's why there are so many layoffs today.

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