Gaming Industry's Acquisition Gold Rush Comes to a Halt

2023-11-09 10:04:25

The Axe Drops on Gaming’s Acquisitions Gold Rush

2023 is being hailed as a landmark year for gaming, with major releases like Zelda: Tears of the Kingdom, Spider-Man 2, and Starfield from the industry's top publishers, as well as a range of popular third-party hits. However, this year has also seen a staggering number of layoffs across the gaming industry, affecting companies such as Bungie and Epic Games. Yet, the root cause of this wave of redundancies can be traced back to a trend that has been steadily growing for the past two years.

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In 2021, the biggest video game news story wasn't the release of a new sequel or exciting game title, but rather Microsoft's announcement of its plans to acquire Activision Blizzard for £69 billion. In fact, from 2020 to 2022, the focus in the industry was less on game launches (which were frequently delayed) and more on which studio would be the next to be bought. Mergers and acquisitions were all the rage during the Covid years.

Embracer's Acquisitions Frenzy

A prime example of this trend is Embracer. The company made acquiring studios a key part of its brand, seemingly acquiring more studios than it released games. For a while, this strategy paid off, grabbing headlines in 2022 with meme-worthy acquisitions like THQ and notable studios such as Crystal Dynamics and Gearbox. Embracer even secured the video game rights to The Lord of the Rings.

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However, as any business analyst will tell you, mergers and acquisitions often result in layoffs and office closures. A quick Google search will confirm this reality. Now, after years of aggressive expansion, Embracer's future appears less promising. The Swedish megacorporation recently announced the permanent closure of Volition, the renowned studio behind Saints Row, and is considering options for Gearbox, a sale that could see the Borderlands developer lose £1.4 billion just three years after its acquisition.

Embracer finds itself at the epicenter of everything that can go awry with an M&A. The company had hoped to secure a £2 billion investment (later reported to be the Saudi Investment Fund) to justify its spending spree. When that deal fell through, Embracer was forced to quickly divest from its more costly purchases. With Volition gone and Gearbox likely to follow suit, Crystal Dynamics can count itself fortunate to have Amazon producing movies and shows based on their popular video game character.

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Even Epic, known for its success with Fortnite, has not been immune to layoffs. Fall Guys studio Mediatonic, acquired by Epic in 2021, experienced significant staff cuts this year. Additionally, Epic sold Bandcamp, its music storefront, a mere year after acquisition. Bandcamp was then sold to music marketing company Songtradr, who proceeded to lay off its staff. And more recently, Bungie, acquired by PlayStation in 2022 for £3.7 billion, made nearly 100 layoffs across key divisions.

Acquisitions Rush and Layoffs

While it is true that not all layoffs this year can be attributed to acquisitions, companies like Ubisoft, BioWare, Team 17, and Creative Assembly have implemented cost-cutting measures resulting in staff reductions. However, the timing between the previous two years' acquisition spree and this year's cutbacks cannot be ignored when trying to understand the sudden surge in layoffs.

Acquisitions, as noteworthy as they are, historically come with consequences. The past couple of years have seen a competitive back-and-forth between PlayStation and Xbox as they vied to acquire more studios, but beneath the excitement lay the knowledge that M&As do not bode well for all employees, no matter what assurances the new parent company provides.

Looking back, it was clear from the start that the acquisition frenzy during the Covid years would have both positive (potential collaborations, stability for some teams) and negative (layoffs, layoffs, layoffs) aspects. Unfortunately, 2023 has showcased the darker side of these mergers and acquisitions.

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It feels particularly heartless for so many layoffs to occur in a year when the gaming industry is flourishing and games are enjoying widespread success, which should make it a joyous time. Terminating employees just as the games they have poured their efforts into are being released is especially disheartening.

However, there is a silver lining. Studios like CD Projekt Red are taking steps to unionize, protecting themselves from potential layoffs. This move seems justified, given the success of Cyberpunk 2077: Phantom Liberty. Teams across Activision and EA are also moving towards unionization. While it remains to be seen whether this will improve the games industry, it is empowering to witness workers in the industry attempting to regain some control after a tumultuous year.

Matt T.M. Kim is IGN's Senior Features Editor. You can reach him @lawoftd.

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