Jaggy's Corner! - Sunday February 24th

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...

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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