In a significant move, Epic Games, the creator of Fortnite, has announced the layoff of approximately 830 employees, accounting for 16 percent of its workforce. CEO Tim Sweeney conveyed this decision in an open letter to employees, revealing that the company had been spending substantially more money than it was generating. Sweeney stated, “We concluded that layoffs are the only way,” emphasizing that this action, undertaken at this scale, is essential to stabilize the company’s financial situation.
For those affected by the layoffs, Epic Games has promised a severance package comprising six months of base pay and healthcare benefits. Additionally, the company will accelerate the vesting schedule for employee stock options, extending the exercise window by two extra years. Notably, around two-thirds of the impacted positions are outside of the core development teams.
Sweeney clarified that Epic had been actively seeking cost reduction measures, including freezing hiring and reducing expenditure on areas like marketing and events. While the concept of the metaverse is still in its early stages, Sweeney expressed a desire for the company to concentrate on building the infrastructure necessary for its games to thrive within the metaverse ecosystem. As a concrete step in this direction, Epic Games partnered with LEGO to create an “immersive digital experience” geared towards children.
Furthermore, Epic Games announced its decision to divest Bandcamp, an online music platform acquired in mid-2022, to Songtradr, a music licensing platform. Another subsidiary, SuperAwesome, a developer specializing in kid-friendly content acquired in 2020, is undergoing restructuring. Its advertising business will become an independent entity, while the Kids Web Services segment and the parent verification and consent management tools will remain part of Epic.
Despite these measures to curtail spending, Epic Games continues to grapple with challenges such as Fortnite’s absence from Apple’s App Store and Google’s Play Store, impacting its revenue. The company also faces a substantial $520 million penalty imposed by the FTC, along with ongoing efforts to overturn a Supreme Court ruling that cleared it of antitrust violations.
Nonetheless, Sweeney remains optimistic about Epic’s future prospects, attributing its strength to Fortnite and the Unreal Engine. The company is gearing up to host Unreal Fest and maintains its commitment to core businesses, pledging to invest in Fortnite first-party development and the broader Fortnite creator ecosystem. Although some projects may experience delays due to resource constraints, Epic Games is willing to make these schedule tradeoffs to achieve its goals and solidify its position as a leading metaverse company.
