Epic Games, the renowned company behind the popular game Fortnite, has made the tough decision to cut approximately 830 employees, which accounts for 16% of its workforce. This drastic move comes as a result of the company’s realization that its ambitious revenue expectations from the metaverse-inspired ventures led to excessive spending, far surpassing its actual earnings.
In a memo sent to Epic Games staff on September 29, CEO Tim Sweeney explained the reasoning behind these layoffs, stating, “We concluded that layoffs are the only way and that doing them now and on this scale will stabilize our finances.” Sweeney candidly admitted that he had previously held overly optimistic beliefs that the company could navigate the transition without resorting to layoffs. However, he now acknowledges the impracticality of that stance.
While Sweeney acknowledged the success of the Fortnite Creator program, which allows players to create and sell in-game content with a 40% revenue share, he also highlighted that this shift had resulted in lower profit margins for the company. He stated, “Success with the creator ecosystem is a great achievement, but it means a major structural change to our economics.”
Apart from the significant workforce reduction, Epic Games is set to part ways with another 250 employees. The company also disclosed its plans to sell the recently acquired music website Bandcamp and spin off SuperAwesome, a marketing company and child-safety tech firm that had joined Epic Games in 2020.
To soften the impact on affected employees, Epic Games has taken the commendable step of offering six months of pay to departing staff. Those residing in the United States, Canada, and Brazil will also receive six months of paid healthcare coverage.
Beyond Fortnite, which boasts an impressive 400 million registered users, Epic Games is known for its Unreal Engine, a powerful video game development suite that has played a pivotal role in the creation of acclaimed titles like God of War and PlayerUnknown’s Battlegrounds.
This workforce reduction and restructuring mark a significant turning point for Epic Games, highlighting the challenges companies face in the ever-evolving world of gaming and the metaverse.