Epic Games is laying off around 16% of all employees, as confirmed today by Epic Games founder and CEO Tim Sweeney. This 16% comes out to roughly 900 employees that have been laid off from the company that is responsible for Unreal Engine, Fortnite, and the Epic Games Store.
In Sweeney's letter to Epic employees, he says, "For a while now, we've been spending way more money than we earn." He blames Fortnite's push towards some sort of a metaverse as one of the key issues. Here is Sweeney's full quote about how they are just bleeding money.
For a while now, we've been spending way more money than we earn, investing in the next evolution of Epic and growing Fortnite as a metaverse-inspired ecosystem for creators. I had long been optimistic that we could power through this transition without layoffs, but in retrospect I see that this was unrealistic.
Of all the possible efforts to reduce costs at Epic Games, Sweeney says that layoffs were the only way to meet financial sustainability.
Epic folks around the world have been making ongoing efforts to reduce costs, including moving to net zero hiring and cutting operating spend on things like marketing and events. But we still ended up far short of financial sustainability. We concluded that layoffs are the only way, and that doing them now and on this scale will stabilize our finances.
Those that were laid off from Epic will get a severance package that includes six months pay, healthcare support, and more.
The consolation is that we're adequately funded to support laid off employees: we’re offering a severance package that includes six months base pay and in the US/Canada/Brazil six months of Epic-paid healthcare. We’re offering to accelerate people’s stock option vesting schedule through the end of 2024 and are giving two additional years from today to exercise the options. In the US we’re also offering to vest any unearned profit sharing from their 401k. And we’ll provide benefits including career transition services and visa support where we can.
Epic Games has also paid an undisclosed amount of money to give away free games through their Epic Games Store to the tune of roughly one per week. This number is skewed slightly during the holidays when Epic typically gave out a new free game every day over a couple of week period. In 2021, leaked documents from the Epic Games v. Apple case revealed that Epic spent over $11.6 million over the span of just nine months (Dec. 14, 2018 - Sept. 26, 2019) on free game giveaways through the Epic Games Store. There is no saying just how much has been spent on these free games since then.
Furthermore, Epic Games has also spent hundreds of millions to secure the timed exclusive rights to a number of new PC releases over the years.
From that same Epic Games v. Apple case, another leaked document provided insight into just how much Epic spent to make just one game exclusive to their storefront for a period of six months. That game was Borderlands 3, which spent just six months as a timed Epic Games Store exclusive. Epic Games paid $146 million for six months of Borderlands 3 exclusiveness. Borderlands 3 is just one of dozens of titles that were timed exclusive on the Epic Games Store. It's difficult to say just how many additional hundreds of millions Epic has spent over the years to secure these deals.
Epic Games also offered Sony $200 million for (timed) exclusive rights to 4-6 titles. This is an offer that Sony obviously refused given how all of Sony's first-party PC releases have come out on Steam, Epic Games Store, and all other PC storefronts at the same time.
It's hard not to look at some of these exorbitant numbers that Epic Games spent on free games and exclusives and wonder how many employees could have been paid or continued to be paid for countless years. Instead, almost 900 employees are being laid off today. While the blame isn't fully on Tim Sweeney's shoulders, his hubris and poor decision making were almost certainly key factors in this disastrous situation facing the company that he runs. Just this year alone, Tim Sweeney tried to suggest that Epic Games was "holding strong" during a recession.
We wish every employee that has been laid off from Epic Games the absolute best going forward. Hopefully everyone lands on their feet sooner rather than later.
In very related news, Epic is increasing the price of V-Bucks by up to 15%. These increased prices will go into effect on October 27th.
I really thought Christian finally found stability in his life after the Hell he went through when he founded Serellan, but he did use the experience as a former independent developer to connect with other studios and aspiring developers to talk about Unreal Engine. While I refuse to support part of Epic Games (no EGS account, so sorry Zips I can't use your referral code, but I do play games on Unreal Engine), I was at best, conflicted on whether to support Christian's future work or not. Now, I don't even know if he'll do a career change, since Epic Games really was a stable job that he loved the most (I said was), since it met his passion for independent game development, without the toxic community that changed his mind.
I can only take a miniscule amount of comfort knowing it wasn't a sudden announcement on Christmas/New Year's, and they all have an actual severence package with extended health benefits. Without notice yes, but still paid instead of completely cut-off. That doesn't make me see Epic Games as a good guy though. I don't support their toxic business practices for a reason. I'm surprised EA's Origin/EA Play is something I'm willing to tolerate in the past, being somewhat less of a toxic practice, and claiming their free games, unlike Epic Games Store.
... Wall of text. I guess this bothered me more than I thought.