Quick take:
- Epic Games is also spinning off SuperAwesome, a digital media ecosystem for content marketers.
- 250 staff members included in the layoffs were part of Bandcamp and SuperAwesone.
- About two-thirds of the layoffs were in teams outside of Epic Games’ core development.
Epic Games has become the latest metaverse company to announce staff layoffs following the likes of Microsoft and Tencent. The Fortnite developer on Thursday said it is laying off 830 employees, representing about 16% of its workforce.
The company also announced it has divested its audio distribution subsidiary Bandcamp, just 18 months after acquiring it in March 2022. Epic is also sinning off SuperAwesome, a digital media ecosystem used by content markets.
Of the 830 employees leaving Epic Games, 250 are associated with the two subsidiaries, with about two-thirds of the layoffs part of teams outside of Epic’s core development, the gaming engine maker said in an email published on its website.
According to Epic, the company’s transition to the metaverse has contributed to a significant reduction in profit margins, which requires structural change.
“While Fortnite is starting to grow again, the growth is driven primarily by creator content with significant revenue sharing, and this is a lower margin business than we had when Fortnite Battle Royale took off and began funding our expansion, ”Epic CEO Tim Sweeney said in an email. “Success with the creator ecosystem is a great achievement, but it means a major structural change to our economics.”
The company said it had tried alternative cost-cutting measures including moving to net zero hiring and cutting operating spend on things like marketing and events, but still could not achieve financial sustainability.
“We concluded that layoffs are the only way and that doing them now and on this scale will stabilize our finances,” Sweeney said.
Moving forward, Bandcamp will be joining the music marketplace Songtradr, while SuperAwesome will continue as an independent company led by its current CEO Kate O’Loughlin.
For the staff members departing Epic Games, the company has organised a severance package that includes six months of base pay and in the US/Canada/Brazil six months of Epic-paid healthcare.
The company is also accelerating the stock option vesting schedule through the end of 2024, giving the departing employees an additional two years to exercise their stock options.
Epic does not expect the layoffs to affect its long-term goals, as it continues to invest in games with Fortnite first-party development, the Fortnite creator ecosystem and economy, Rocket League and Fall Guys.
“We’re cutting costs without breaking development or our core lines of businesses so we can continue to focus on our ambitious plans,” Sweeny said.
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