Epic Games, the studio behind “Fortnite,” has cut its workforce by 16% with 830 employee layoffs as part of a shift in business strategy.
CEO Tim Sweeney wrote in a note to employees Thursday that “Fortnite” will pivot to a creator-driven platform.
Employees who have been let go will receive a severance package that includes six months of base pay and, in the United States, Canada and Brazil, six months of Epic-paid healthcare. Offers to accelerate stock option vesting schedules through the end of 2024 stand with an additional two years from today to undertake options.
“For a while now, we’ve been spending way more money than we earn, investing in the next evolution of Epic and growing ‘Fortnite’ as a metaverse-inspired ecosystem for creators,” Sweeney wrote. “I had long been optimistic that we could power through this transition without layoffs, but in retrospect I see that this was unrealistic.”
Epic Games’ Bandcamp audio distribution platform is set to be acquired by music marketplace Songtradr. The company’s SuperAwesome advertising arm will branch into its own company under current CEO Kate O’Loughlin since its founders have re-purchased the firm. Epic retains Kid Web Services (KWS), the parent verification and consent management toolset.
“Epic folks around the world have been making ongoing efforts to reduce costs, including moving to net zero hiring and cutting operating spend on things like marketing and events,” Sweeney wrote. “But we still ended up far short of financial sustainability. We concluded that layoffs are the only way, and that doing them now and on this scale will stabilize our finances.”
Sweeney also wrote that “Fornite 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. Success with the creator ecosystem is a great achievement, but it means a major structural change to our economics.”
The Hollywood Reporter first reported the news, citing Sweeney’s full memo.
“Epic’s prospects for the future are strong,” Sweeney concluded. “We have amazing game experiences across multiple platforms. We’ve built the best engine in the world, and will be hosting Unreal Fest next week to bring the community together and spotlight the things they are building with Unreal Engine and UEFN. Creators are making a living building for the Fortnite ecosystem, with time in third-party games now exceeding first-party. We’re cutting costs without breaking development or our core lines of businesses so we can continue to focus on our ambitious plans. About two-thirds of the layoffs were in teams outside of core development. Some of our products and initiatives will land on schedule, and some may not ship when planned because they are under-resourced for the time being. We’re OK with the schedule tradeoff if it means holding on to our ability to achieve our goals, get to the other side of profitability and become a leading metaverse company.”