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Big Video Game Publishers Like Microsoft Are Paving Their Own Path To Irrelevance

The logical endpoint of prioritizing short-term profits over long-term anything

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This week, Microsoft — a company that already announced layoffs of 1,900 game workers earlier this year — once again took the scythe to its own workforce, shuttering four Bethesda studios in a single swing. It did so, according to an email to staff from Xbox Game Studios head Matt Booty, to “double down” on franchises. This has become a common refrain among companies justifying ruthless bloodletting in recent times. It will also doom them to irrelevance in the long run.

The latest round of layoffs claimed Arkane Austin, which authored the not-so-great Redfall last year (but also the stellar Prey in 2017) and Tango Gameworks, which had a reputation for pumping out interesting originals in the form of last year’s well-received (and apparently successful) Hi-Fi Rush, Ghostwire: Tokyo in 2022, and The Evil Within and its sequel before that. Microsoft also pulled the plug on Roundhouse Studios, a crew of developers from the studio behind the original Prey (as opposed to Arkane’s reboot), and Mighty Doom creator Alpha Dog Studios. 

One thing these studios had in common was original series, which Microsoft’s tired lineup of long-in-tooth franchises sorely needs. However, because none of the above games achieved Next Big Thing status and caused the almighty number to soar, Icarus-like, into the arms of infinity, Microsoft decided to cut its losses (which, again, in some cases were actually profits). This mirrors the Activision Blizzard cuts from earlier this year, which saw Microsoft can Blizzard’s long-in-development survival game, another original with — at least, according to its developers — a lot of potential. 

Layoffs at companies like Sony and EA — the latter of which recently proclaimed that it plans to “double down on our biggest opportunities, including our owned IP, sports, and massive online communities” — have been accompanied by similar rhetoric. Both companies canceled multiple unannounced projects, including a “brand new IP” that was in development at the now-closed Sony studio in London. Take-Two also recently canceled several projects and shut down two studios, including Roll7, a noted purveyor of beloved original games. Meanwhile, following its own mass layoffs late last year, Epic has put studios with demonstrable ability to create imaginative new hits, like Fall Guys creator Mediatonic, on Fortnite duty.

This is nothing new, though the scale at which it’s occurring now is extremely alarming. For years, layoffs have been accompanied by whispers of upstart projects unceremoniously dumped down the trash chute. When companies decide it’s time to “streamline” — an odd phrase when the goal is infinite expansion in all directions — even tentative attempts at something new are the first to go.

This is not to say that the triple-A side of the video game industry is divesting from the original ideas business altogether, but recent times have seen a pronounced shrinkage on that front. Companies have instead decided to place their chips on a small handful of franchise-sized big bets, with the hope of extracting endless growth from games that live forever and expand ceaselessly. But this is not an effective way to steward an industry forward. You can’t keep hacking away at a tree’s roots and expect it to keep growing. At some point, something’s got to give.

Arguably, it already has. Franchise fatigue is real not just in video games but in film and TV as well (Hi, Marvel). Call of Duty is stuck in an incredibly expensive rut. Destiny 2 — once a forever game darling, at least where industry execs were concerned — is now frantically flailing to win back its fan base. Tentpole entries in decades-old series like Final Fantasy and Diablo have elicited only mild excitement, at best, from diehards. Companies like Ubisoft find themselves trapped an eternal loop of reinventing series like Assassin’s Creed and Far Cry, to diminishing returns, while taking noncommittal stabs in the direction of originality with games like Skull and Bones (a franchise non-starter that began as an Assassin’s Creed game). Heck, even Redfall is an example of this trend, an attempt at building a new live-service dynasty foisted on a studio whose strengths clearly laid elsewhere.

In recent times, triple-A publishers have repeatedly had their lunch eaten — at least, in terms of mindshare — by more creatively nimble indies. Lethal Company was last holiday season’s breakout hit, and Palworld followed not long after. Balatro and Manor Lords have come out of nowhere to tear up the Steam charts, as have mind-bogglingly fast riffs on this new paradigm like the Lethal Company-inspired Content Warning. Helldivers 2 is both the exception that proves the rule and an example of exactly why big publishers should let studios cook even in the face of only modest success (or failure!). Without Helldivers 1, a relative unknown, you don’t get Helldivers 2, the biggest breakout hit of the year. Recent triple-A darlings like Baldur’s Gate 3 and Elden Ring come from similar lineages.

Yes, it’s a slow year for triple-A publishers, but that’s what happens when you spend years quietly canceling projects that you’re worried might not achieve such a spectacular liftoff as to take over the entire universe. Eventually, it catches up with you. And years from now — already a record year for layoffs — it’s gonna catch up with the video game industry again. 

“So in a few years when there’s a massive gap in the industry from all the games that were never made by the people who got laid off at the studios that were shuttered, who’s going to make your games?” wrote JC Lau, game developer at ProbablyMonsters. “Where’s ‘shareholder value’ going to come from when you’ve cut to the bone?”

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