Epic Games to Cut Over 1,000 Jobs

Epic Games announced on September 27 that it will cut more than 1,120 positions, including 870 full-time roles and 250 contractor gigs. This move will reduce the company’s workforce by about 16% and leave around 3,700 employees.

The company’s operating cash burn has been around $750 million to $1 billion per year. By cutting staff, Epic expects to save around $500 million annually, which could bring its cash flow back into positive territory by the end of 2024.

Reasons Behind the Layoffs

Epic’s decision to cut staff is likely due to a decline in revenue from its flagship game, Fortnite. The game’s monthly active users have dropped by 21% from their 2021 peak, according to App Annie and Sensor Tower data. This decline in revenue is likely to have a significant impact on the company’s financials.

Epic’s other flagship, Unreal Engine 5, has around 3 million licensees, but conversion to paid enterprise tiers is below 12%. The company’s metaverse experiments have contributed less than 5% of its top-line revenue, despite a reported $1 billion+ investment.

Reasons Behind the Layoffs Epic’s decision to cut staff is likely due to a decline in revenue from its flagship game, Fortnite.

Impact on Employees

The layoffs will likely have a significant impact on Epic’s culture and morale. The company’s restructuring hit entire product groups, including the “Verse” teams that built music festivals and party worlds. International talent was also affected, with H-1B visa holders given a 60-day window to find new employment.

Internal Slack channels were filled with #opentowork posts after the announcement. Senior engineers and other employees expressed concerns about the future of the company and their own job security.

Impact on the Gaming Industry

The layoffs will likely have a significant impact on the gaming industry, including ad-tech firms that relied on Fortnite’s 100 million-strong logged-in audience. CPM rates are expected to drop by 12-15% this holiday quarter.

Labor organizers see an opportunity to unionize more game studios, with the Communications Workers of America filing petitions for two U.S. game studios within 48 hours of the layoff announcement.

A New Era for Epic Games

Epic’s CEO, Tim Sweeney, has promised “profitable growth” by 2024, with a focus on three pillars: Fortnite, Rocket League, and Unreal Engine. Fortnite Chapter 5 will reintroduce paid season passes, and Unreal Engine’s pricing model is being tweaked to leave the upside tied to customer success rather than volume.

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Labor organizers see an opportunity to unionize more game studios, with the Communications Workers of America filing petitions for two U.S.

The company’s roadmap hinges on monetizing creators without eroding its own margins. This balance will determine whether Epic emerges as a leaner, more innovative player or a cautionary tale of metaverse overreach.