Fortnite developer Epic Games recently announced the dismissal of approximately 16% of its workforce, affecting around 830 employees. This drastic decision has left many wondering what led to this action and how it will impact the company’s future.
Epic Games CEO Tim Sweeney explained that the company was seeking to reduce costs globally and transitioning to a “zero net hiring” policy while cutting operational expenses such as marketing and events.
However, the company faced significant difficulties in terms of financial sustainability, which led to layoffs in order to “stabilize” its finances.
One of the main reasons for this situation was Epic Games’ “unrealistic” vision of the metaverse, which the company admitted had “flopped.” Sweeney acknowledged in an internal statement shared on the company’s website that they had spent “much more” than they earned, despite initially believing they could overcome this transition without workforce cuts.
The attempt to transform Fortnite into a metaverse-inspired ecosystem for creators proved to be unviable, according to the company.
Sweeney highlighted that while Fortnite is starting to grow again, this growth is mainly driven by user-generated content, resulting in lower profit margins compared to when Fortnite Battle Royale took off and funded the company’s expansion. The company also admitted that the metaverse may be a proposal that “won’t happen.”
The affected employees will receive a severance package that includes six months of base salary. Additionally, they will be entitled to six months of health coverage paid by Epic Games in the United States, Canada, and Brazil.
In addition to the layoffs, Sweeney also announced the sale of the Bandcamp platform for an undisclosed amount, just 18 months after its acquisition. The new owner of Bandcamp is the music marketing company Songtradr.
Although Epic Games sought $2 billion in funding for metaverse-related development in April 2022, led by Sony Group Corporation and KIRKBI, the company has decided to abandon this vision in favor of a more realistic approach to its financial sustainability.