### How the big ones are putting pressure on others to let go: a look at MICROSOFT’S layoffs through the ripple effect.

While video games continue to enchant millions and whole new worlds of adventure are mined from the digital space, there is an ugly subtext to the world of gaming that is becoming increasingly difficult to ignore. At the start of 2023, Avalanche Studios – the developer behind the Just Cause franchise – announced it would lay off 50 staff as it shuts down its offices in New York and Montreal. The decision affects 60 staff in total, and comes as a glaring reminder that some of the most creative sectors of the economy can be among the most precarious too. Here we take a closer look at this trend. We also look at how Microsoft and other big tech companies are attempting to traverse these troubled waters.

### **Avalanche Studios' Tough Decision: A Sign of Broader Issues**

#### **The Beginning of a Difficult Journey**

In January, an ‘incredibly hard’ decision. In February, a ‘really hard’ choice. In March, ‘really very hard’. What could possibly be causing Avalanche Studios to make such difficult decisions? Over the past year, the studio has, like others around the globe, become famous for laying off 9 per cent of its global workforce and closing two offices. The move ‘ensures the long-term stability of the business’, they said. In the first three months of 2023 alone, more than 10,000 developers worldwide lost their jobs. The decline in the games industry began long before Microsoft bought Activision Blizzard for a record $72 billion in 2022, and even Sony had to downsize its first-party studios. Since then, Microsoft has caused layoffs at its Activision side, and Sony has had to take a new round of cuts. Not to mention Riot and EA.

### **The Industry-Wide Layoff Epidemic**

#### **A Growing Trend of Reduction**

Lot of layoffs in the game industry. MS: Yeah, with economic pressures now, Microsoft just shut down their Bethesda [studios] in Austin, Texas, San Francisco; Sony’s doing numbers there, all these different studios. MS: Sony shut down two of …Thank you. It’s every man for himself. MS: Every man for himself! They’re restructuring. MS: Same here.

### **Microsoft's Strategy Amidst Industry Turbulence**

#### **Navigating Through Stormy Seas**

Microsoft, perched amid this tumult, has become a case study in how to ‘walk the walk’ on balance sheets Yet beyond the enviable wish-list of new IP that Microsoft has managed to pull together in the past three years, the company has also been incredibly canny about prioritising what it really needs to own in the near term, and what it can get away with outsourcing. It’s part of the longer-term strategy to make games a stable, sustainable business for Microsoft. But right now, and for the foreseeable future, Microsoft needs to make some difficult calls.

### **The Human Aspect of Layoffs**

#### **Supporting Those Affected**

The people aspect of layoffs – of being thrust into the job market and a place you hadn’t expected to be – is something that’s all too easy to overlook when dealing with financials. Avalanche Studios is one of the few companies to have said it would help its laid-off employees, but who’s to say things won’t fall apart? Ultimately, it’s down to industry-wide practices and improvements to the wider ecosystem that leads to backup and support for the people. For Microsoft and others, the future of the gaming industry is in their hands.

### **Unionization in Gaming: A Ray of Hope**

#### **A Collective Response to Challenges**

This latest instance of that campaign – the unionisation of 100 Avalanche developers with the Swedish trade union Unionen, and the studio’s subsequent agreement to a collective bargaining deal – can happen only because the discourse on labour rights in gaming seems to have picked up momentum. And as we enter a new period of layoffs and game cancellations, perhaps unionisation is one, albeit partial and temporary, path towards more security and better protections for game workers, one that speaks to and aims to counteract the scales of contingency.

### **The Future Forward: Resilience and Reinvention**

#### **Adapting to Change**

The ability to twist and turn with the economic winds will be key to the future of the gaming universe. Microsoft and its rivals will have to maintain a delicate balance between innovation and prudence. More restructurings are undoubtedly ahead but, to ensure success, they will need to remain committed to the creation and promotion of new technologies and new gaming experiences that will play to the tastes and needs of Generation Z and beyond. Above all, the ability of companies and their workforce to withstand the storms of destruction and rejuvenation, coupled with a creative commitment to reinvention, will determine the gaming future.

### **Understanding Microsoft**

#### **Right in the middle of it all**

Right in the middle of it all is Microsoft, a colossus of gaming, but also tech in general – with a portfolio spanning not just its Xbox console but also the development and the publishing of games (on Xbox and otherwise) and cloud gaming. It’s no secret that the current economic climate isn’t hospitable, and that industry titans like Microsoft are grappling with how to handle that; yet given its breadth, as it ventures into new ideas to maintain its status and influence, this tech giant’s footprints on gaming’s future are likely to take a wide trajectory across many levels of the industry.

Creative and tech-driven, the gaming industry is now facing one of its toughest periods in its existence. As companies such as Microsoft navigate through these unprecedented waters, the challenges aren’t just about staying afloat and making it out the other end – but about creating a better, more innovative, and more resilient firm on the other side.

Jun 06, 2024
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