Epic Games, the company renowned for Fortnite, has downsized its workforce by 16%, or around 830 employees, attributing the decision to unrealistic revenue expectations stemming from its metaverse ambitions. CEO Tim Sweeney acknowledged that the company had been overspending relative to its earnings.
Metaverse Ambitions and Economic Realities
Epic Games, driven by its aspirations in the metaverse space, found itself in a financial quagmire due to overzealous spending. Tim Sweeney, in a memo to Epic Games staff on September 29, cited the need for layoffs to stabilize the company’s finances.
Sweeney expressed optimism about navigating the transition without layoffs but conceded that this optimism was unrealistic. Unrealistic revenue expectations and soaring costs necessitated the restructuring.
Fortnite Creator Program Impact
While Epic Games credited its growth to the Fortnite Creator program, which permits players to create and sell in-game content, the shift came at the cost of reduced profit margins. The program offers creators a 40% share of the revenue, impacting the company’s financial structure significantly.
In addition to the staff layoffs, Epic Games is divesting assets. The company announced its intention to sell Bandcamp, a recently acquired music website. Moreover, it plans to spin off SuperAwesome, a child-safety technology firm that joined Epic Games in 2020.
Support for Affected Employees
Epic Games has taken steps to support the affected employees during the transition. Departing staff members will receive six months of pay, and those residing in the United States, Canada, and Brazil will also receive six months of paid healthcare.
The decision to cut jobs and streamline operations underscores the challenges and economic realities that even major players like Epic Games face in the ever-evolving world of gaming and the metaverse.