The gaming industry is going through one of the strangest periods in its history. On one side, massive companies like Microsoft, Sony, and Riot Games are laying off thousands of workers and closing studios. On the other side, small indie games with tiny budgets are becoming massive hits and making more money than anyone expected. In just the last three years, about 45,000 game developers lost their jobs. That’s enough people to fill a small stadium. At the same time, indie games like Clair Obscur: Expedition 33, Balatro, and Manor Lords are selling millions of copies with teams of sometimes just one or two people. What’s going on? Why are big gaming studios failing while small teams are winning?
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The Scale of the Gaming Industry Problem
The numbers are shocking. Between 2022 and early 2026, approximately 45,000 gaming jobs were cut. That’s not 45,000 total jobs in the industry – that’s 45,000 people who got fired or laid off. Here are some of the biggest layoffs:
- Microsoft Gaming – Laid off about 11,900 workers across multiple rounds.
- Embracer Group – Cut approximately 8,000 workers.
- Unity Technologies – Laid off between 3,000-3,400 people across six different rounds of cuts.
- Sony Interactive Entertainment – Let go of about 1,300 workers and completely shut down London Studio and Firewalk Studios.
- Riot Games – Cut 530 employees in early 2024, and just announced more cuts to their 2XKO fighting game team in February 2026.
- Ubisoft – Thousands of layoffs spread across 2022-2026, with more announced for their Paris headquarters.
These aren’t small companies struggling to survive. These are some of the richest and most successful gaming companies in the world. Microsoft is worth over a trillion dollars. Sony makes billions every year. So why are they firing so many people?
3 Reasons Why Big Companies Are Laying Off Workers
1. They Hired Too Many People During COVID
During the COVID-19 pandemic from 2020-2022, everyone was stuck at home. People played video games more than ever before. Gaming companies saw their sales explode and thought this growth would continue forever. So they went on a hiring spree.
Microsoft bought Activision Blizzard for $68.7 billion. Embracer Group bought dozens of studios. Unity hired thousands of new workers. Every company expanded rapidly because they believed gaming would keep growing at pandemic levels.
But then the world opened back up. People went outside again. They spent less time gaming. Suddenly all these companies had way too many employees for the amount of money they were actually making. Their solution? Mass layoffs.
2. AAA Games Cost Too Much Money
Making big AAA games has become incredibly expensive. Games that used to cost $50-150 million to make now cost $300-500 million or more. And that’s just development – marketing can cost another $50-150 million on top.
When games cost that much, they need to sell millions of copies just to break even. If the game fails or only does “okay,” the company loses hundreds of millions of dollars. That’s too risky for most companies, so they’re cutting back, canceling games, and firing the teams that were working on them.
3. Live Service Games Are Failing
Many big companies bet everything on “live service” games. Examples include Fortnite, Call of Duty Warzone, or Destiny 2 that keep you playing forever with constant updates and make money from battle passes and cosmetics. The problem is that players only have time for a few live service games at most. If you’re already playing Fortnite and Apex Legends, you’re probably not going to start playing a new live service game that asks for hundreds of hours of your time. Several major live service games launched in 2023-2024 and completely failed:
- Concord (Sony) – Shut down just two weeks after launch. Sony closed the entire studio (Firewalk) and laid off 170 people.
- Suicide Squad: Kill the Justice League – Cost over $200 million to make, sold poorly, killed the studio’s reputation.
Multiple other live service games shut down within months of launching, with their developers getting laid off.
The 2XKO Example
Riot Games just announced layoffs for their fighting game 2XKO in February 2026. The announcement is a perfect example of what’s happening across the industry:
“The game has resonated with a passionate core audience, but overall momentum hasn’t reached the level needed to support a team of this size long term.”
Translation: The game didn’t get enough players, so we’re firing people.
But here’s what makes this especially frustrating for players and developers:
- Terrible Name – Almost everyone agrees “2XKO” is a confusing name. Many people thought it was a basketball or sports game, not a fighting game with League of Legends characters.
- No Marketing – Most gamers didn’t even know the game launched. Riot barely advertised it. People who were excited for it missed the release entirely.
- Too Few Characters – The game launched with only 8-11 characters. For a tag team fighting game where you pick two characters, that’s way too few. Most fighting games launch with 20-30+ characters.
- Wrong Genre Choice – Fighting games are niche. Even successful fighting games only have 5,000-10,000 active players a month after launch. Riot expected League of Legends numbers (millions of players) from a genre that naturally has a small audience.
- Tag Fighter Mistake – Tag team fighting games are even more niche than regular fighting games. They’re harder to learn and appeal to an even smaller audience.
The developers worked for years on 2XKO. Now they’re being laid off because executives made bad decisions about the game’s name, marketing, genre, and roster size. This pattern repeats across the industry – developers work hard for years, executives make bad calls, the game underperforms, developers get fired while executives keep their jobs.
4 Reasons Why Indie Games Are Succeeding
While AAA companies fire thousands of workers, tiny indie teams are making some of the most successful games in the industry. Here’s why:
1. They Cost Almost Nothing to Make
Indie games typically cost anywhere from $50,000 to maybe a few million dollars at most. Compare that to the $200-300 million AAA games cost.
- Clair Obscur: Expedition 33 was made by a small French studio called Sandfall Interactive. The game has beautiful graphics that look AAA quality, but it cost a fraction of what a AAA game costs.
- Balatro was made by one person (LocalThunk) and sold over 5 million copies.
- Manor Lords was made mostly by one person (Greg Styczeń) and sold 3 million copies in its early access release. A single developer made more money than some AAA studios.
When your game costs $100,000 to make instead of $100 million, you only need to sell 5,000-10,000 copies to make a profit instead of needing 5-10 million sales.
2. They Take Creative Risks
AAA games have become very safe and boring. Everything is either a sequel, a remake, or a copy of something that already worked. Companies are too afraid to try new ideas because if the game costs an astronomical figure and fails, the company could go bankrupt. Indie developers can afford to be weird and creative because they’re not risking hundreds of millions. This leads to games like:
- Balatro – A poker roguelike that shouldn’t work but becomes one of the biggest games of 2024
- Lethal Company – A co-op horror game made by one person that became a viral sensation
- Vampire Survivors – A minimalist survival game that spawned an entire genre
- Stardew Valley – A farming sim made by one person that sold over 30 million copies
These games couldn’t exist as AAA projects because no executive would approve the budget for “weird poker game” or “minimalist vampire game.” But as indie projects, developers can make whatever they want.
3. They Don’t Need Crazy Number of Players
AAA companies need their games to reach 10+ million players to justify the massive budgets. Indie games can be successful with 50,000-500,000 players. This means indie developers can make games for niche audiences that AAA companies ignore. Want a deep, complex city builder? Indie devs make those. Want a cozy farming game? Indie devs. Want a weird experimental horror game? Indie devs. AAA companies ask “will this appeal to everyone?” Indie developers ask “will this appeal to someone?” That’s a much easier question to answer yes to.
4. They Release When Ready, Not When Investors Demand
AAA games have strict deadlines set by investors and executives. If the game isn’t ready, too bad – it ships anyway. That’s why so many AAA games launch broken and buggy. Indie developers (especially self-funded ones) can take as long as they need. Stardew Valley took 4+ years. Hades took years of early access. Baldur’s Gate 3 spent 3 years in early access. When you’re not answering to shareholders who demand quarterly profits, you can actually finish your game properly.
3 Things It Could Mean for the Gaming Industry
1. AAA Gaming Is Unsustainable
The current AAA model is broken. Games cost too much, take too long, need too many sales, and offer too little innovation. Companies are trapped in a cycle:
- Make safe sequels and remakes to reduce risk
- Charge $70+ for the game plus $50+ for DLC and battle passes
- Launch with bugs and missing content
- Players get mad and buy fewer copies
- Game doesn’t hit sales targets
- Company lays off developers
- Repeat
This can’t continue. Eventually, companies will either change how they make games or the AAA industry will collapse entirely.
2. Indies Are Filling the Gap
As AAA companies make fewer games and take fewer risks, indie developers are stepping in. They’re making the creative, innovative, weird games that AAA companies won’t touch. Players are noticing. Some of the most popular and highest-rated games in recent years have been indies:
- Hades
- Hollow Knight
- Stardew Valley
- Vampire Survivors
- Balatro
- Clair Obscur: Expedition 33
When people talk about their favorite games, they increasingly mention indies instead of AAA titles.
3. Developers Are Leaving the Industry
One-third of U.S. game developers were laid off in the last two years according to a 2026 study. Many of those people are leaving the gaming industry entirely because:
- Job security is terrible
- Constant layoffs create anxiety and stress
- Better pay and stability in other tech jobs
- Gaming companies treat employees poorly
Junior developers are especially affected. In the UK in 2023, only 2.9% of available jobs were entry-level positions. That’s only 34 junior positions in the entire country for the whole year. By 2024 there were zero apprenticeships available in the entire UK gaming industry. If companies don’t hire and train new developers, where will the next generation come from? Eventually they’ll run out of experienced senior developers as the current generation retires, and there won’t be anyone to replace them.
The Bigger Picture: What’s Really Happening
The gaming industry is going through the same crisis as other entertainment industries. Here’s what’s really going on:
Investors Ruined Everything
During the 2010s and early 2020s, investment money was cheap and easy to get. Interest rates were low, so investors threw money at anything that might grow. Gaming companies took that money and expanded rapidly through mergers and acquisitions.
But investors don’t actually care about making good games. They care about making money. When games don’t make enough profit fast enough, investors demand layoffs to “cut costs” and make the quarterly numbers look better. This is why you see companies lay off thousands of workers, then a few months later report “record profits.” The profits came from firing people, not from making better games.
Short-Term Thinking Killed Long-Term Success
Public companies are obsessed with quarterly earnings reports. Every three months, they have to show investors that profits went up. If profits didn’t go up, stock price goes down. This creates terrible incentives:
- Can’t take risks on creative games (might fail)
- Can’t spend time polishing games (takes too long)
- Can’t invest in new talent (costs money now, pays off later)
- Must chase trends (whatever made money last quarter)
Making a great game takes 3-7 years. But investors want results every 3 months. These timelines don’t match. Indie developers don’t have this problem. They can take as long as needed to make a good game because they’re not answering to shareholders demanding quarterly profit increases.
The Metaverse and Live Service Delusion
Companies wasted billions of dollars chasing two trends that didn’t work:
- The Metaverse – Meta (Facebook) spent billions on metaverse development. It completely failed. Other companies also wasted money on metaverse projects that nobody wanted.
- Live Service Everything – Companies tried to turn every game into a live service with battle passes and seasons. Most failed because players only have time for 2-3 live service games maximum, and those slots are already taken by Fortnite, Call of Duty, Apex Legends, etc.
All that money spent chasing trends could have been spent making good games. Instead, it was wasted, and now workers pay the price through layoffs.
4 Things That Need to Change
1. Lower Budgets, More Games
Instead of spending $300 million on one game, spend $30 million on ten games. Some will fail, but some will succeed, and you’re not risking everything on one title. This is what indie publishers do, and it works.
2. Stop Chasing Trends
By the time a big company notices a trend and makes a game to capitalize on it, the trend is already over. Battle royale games were popular in 2017-2019. Companies that started making battle royale games in 2020-2022 found nobody wanted them anymore. Make games that are good, not games that chase whatever was popular last year.
3. Treat Developers Like People
The current system treats developers as disposable. Hire hundreds for a project, fire them when it’s done, hire new people for the next project. This creates:
- No job security
- No company loyalty
- Constant stress and anxiety
- Loss of institutional knowledge
- Worse games (experienced devs leave, new devs make same mistakes)
Companies that treat employees well and offer job security make better games. Look at Nintendo – they rarely do mass layoffs, they invest in their people, and they consistently make great games that sell well.
4. Accept That Some Genres Are Niche
Fighting games have small audiences. That’s okay! Not every game needs to reach 10 million players. If Riot had made 2XKO with a realistic budget expecting 100,000-500,000 players, it would be a success. Instead, they spent AAA money expecting millions of players for a niche genre, and now they’re shocked it “failed.” Know your audience. Budget accordingly. Stop expecting every game to be the next Fortnite.
We Are at a Crossroads…
The gaming industry is at a crossroads. AAA companies are laying off tens of thousands of workers while making worse games that cost more money and take longer to develop. Meanwhile, tiny indie teams are making creative, innovative, successful games with budgets 1% the size of AAA projects.
The AAA model is broken. Games that cost $200-300 million need to sell millions of copies just to break even, which means companies can’t take creative risks and everything becomes safe sequels and remakes. When those games don’t meet unrealistic sales expectations, thousands of developers lose their jobs while executives keep their bonuses.
Indie games are thriving because they cost less, take creative risks, and don’t need millions of players to be profitable. Games like Clair Obscur: Expedition 33, Balatro, and Manor Lords show that you don’t need hundreds of millions of dollars to make great games – you need creativity, talent, and the freedom to try new ideas.
The future of gaming isn’t in $300 million blockbusters made by overworked teams facing constant layoffs. It’s in smaller, smarter, more creative games made by developers who are treated well and given the time and resources to do good work. Until AAA companies figure this out, they’ll keep laying off thousands of workers while wondering why indie games are eating their lunch.
