In a recent announcement, Epic Games revealed plans for a significant reduction in its workforce, affecting approximately 16% of its employees. Alongside these layoffs, the company has decided to divest Bandcamp and spin off most of SuperAwesome.
Epic Games mass layoffs: Here’s everything you must know
Epic Games, renowned for its popular gaming title Fortnite and its Unreal Engine, attributed the layoffs and divestitures to financial challenges resulting from extensive investments in Fortnite‘s expansion and the development of a creator-focused ecosystem.
Tim Sweeney, the CEO of Epic Games, acknowledged that the company had been consistently spending more capital than it was generating.
This financial strain arose from Epic’s ambitious vision to transform Fortnite into a metaverse-inspired ecosystem while heavily investing in creator content with substantial revenue sharing.
The latter business model, although successful, operates at a lower profit margin than the initial Fortnite Battle Royale explosion, which funded Epic’s expansion efforts.
Efforts to mitigate costs had been ongoing within Epic Games, including a halt to net hiring and cuts to operating expenditures related to marketing and events.
However, these cost-cutting measures fell short of achieving financial sustainability. Consequently, Epic Games concluded that significant layoffs were necessary to stabilise its finances.
Bandcamp will now be synced with Songtradr
In addition to layoffs, Epic Games announced divestitures. Bandcamp, the music distribution platform, is set to join Songtradr, a music marketplace company that supports artists.
Meanwhile, SuperAwesome’s advertising division will become an independent entity, retaining the SuperAwesome brand and under the leadership of its current CEO, Kate O’Loughlin.
Notably, Kids Web Services (KWS), the parental verification and consent management toolset, will remain under the Epic Games umbrella.
Epic Games expressed its commitment to supporting the affected employees by offering a comprehensive severance package.
This package includes six months of base pay, six months of Epic-paid healthcare in the United States, Canada, and Brazil, as well as accelerated stock option vesting until the end of 2024.
Additionally, employees in the U.S. will have the opportunity to vest any unearned profit sharing from their 401(k). Epic Games also pledged to provide career transition services and visa support where possible.
For the employees who will continue their roles at Epic Games, the company’s leadership is expected to provide further details regarding the organization’s future direction.
“Epic’s prospects for the future are strong. We have amazing game experiences across multiple platforms. We’ve built the best engine in the world, and will be hosting Unreal Fest next week to bring the community together and spotlight the things they are building with Unreal Engine and UEFN,” Sweeney wrote.
While some products and initiatives may experience delays due to resource constraints resulting from the layoffs, Epic Games is determined to focus on its ambitious plans, Sweeney added.
“We’re cutting costs without breaking development or our core lines of business so we can continue to focus on our ambitious plans. About two-thirds of the layoffs were in teams outside of core development.
“Some of our products and initiatives will land on schedule, and some may not ship when planned because they are under-resourced for the time being. We’re ok with the schedule tradeoff if it means holding on to our ability to achieve our goals, get to the other side of profitability and become a leading metaverse company.”