Epic Games announces 16% layoffs

Epic Games CEO, Tim Sweeney, conveyed to internal staff that there will be a reduction in force, a measure to stabilize the company’s expenditures that far exceed its revenues. Approximately 16% of the workforce, around 830 individuals, will be affected.

Epic Games has committed to offering severance packages to the impacted employees, encompassing six months of base salary and healthcare expenses. Furthermore, the company plans to expedite the option for employees to decide on the sale of their shares before 2024, extending an additional two-year window for careful consideration regarding this decision. This reduction primarily targets non-core development teams, ensuring that the company continues its stable operations.

Tim Sweeney emphasized that Epic Games had continually strived to reduce expenses, not only by pausing external recruitment but also by curtailing non-essential external marketing and miscellaneous activities. Nevertheless, the inevitability of layoffs emerged as a requisite for cost containment.

Beyond the announcement of layoffs, Epic Games intends to divest from Bandcamp, an online music service acquired in 2022, proposing its sale to the audio licensing platform, Songtradr. Moreover, the company is set to divest from SuperAwesome, a child-friendly developer acquired in 2020. While certain segments of the business will be sold off, technological assets such as children’s internet services and parental verification tools will be retained. The advertising segment, meanwhile, will transition into an independently operated entity.

These layoffs, divestitures, and asset sales undeniably aid in maintaining Epic Games’ operational equilibrium. It also alleviates pressure from major external investors, including Tencent and Sony. However, the ongoing litigation between Epic Games and Apple, coupled with the challenges of listing “Fortnite” on the App Store and Google Play Store, continues to strain the revenue streams.

Yet, Tim Sweeney remains optimistic about Epic Games’ substantial growth opportunities, especially with upcoming titles developed using Unreal Engine 5. “Fortnite” consistently generates robust revenues, and there are plans to tap into the burgeoning metaverse trend. Sweeney underscored that there will be no cuts to any core business funding, and the company envisions growth through these central operations.