Last week, Greg Street (Ghostcrab), the former lead designer of *League of Legends*, revealed that Fantastic Pixel Castle, the studio he heads, will close on November 17:
NetEase has stopped funding the studio, and Ghostcrab has been unable to find a new publisher to take over. After careful consideration, Ghostcrab ultimately decided to shut down the studio and help its employees find new jobs.
This is yet another overseas studio that NetEase has shut down in the past year. Previously, NetEase had closed Jar of Sparks (the lead developer of Halo Infinite), T-Minus Zero Entertainment (comprising BioWare veterans), and Bad Brain Game (comprising former employees of Ubisoft Toronto).
Not only is NetEase closing its overseas studios, but major European and American game developers have also been slashing projects and downsizing their workforces in recent years. Just as the domestic gaming industry did a few years ago, the European and American gaming industry is also undergoing a period of profound restructuring.
According to incomplete statistics, the gaming industry in Europe and the United States has laid off more than 30,000 employees so far in 2023. No one has been spared, from small independent game studios to major companies like Sony, Microsoft, and EA.
An overseas developer told Game Tea House that the depth and duration of this round of adjustments in Europe and the U.S. are unprecedented in his career.
What surprised Game Teahouse even more is that, even in the current challenging environment, game developers in Europe and the U.S. haven’t returned to the office yet!
01
It took me six months to find a new job, and then I was laid off three months later.
The profound restructuring currently underway in the European and American gaming industries is nothing new compared to what domestic industry professionals have experienced in recent years.
Projects are being canceled, studios are closing, and the scripts that industry professionals both at home and abroad are receiving are all very similar.
Flipping through recent news, Supercell has shut down *Splatoon*, which had been gaining significant momentum; Microsoft’s Xbox division has once again laid off hundreds of employees, affecting Activision Blizzard, Halo Studios, and others; Amazon has canceled *New World* and the *Lord of the Rings* online game, impacting teams in Irvine and San Diego…
News of layoffs is constantly in the headlines
Game companies in Europe and the U.S. are currently facing severe budget cuts, making it difficult for laid-off employees to find new jobs. It’s not uncommon for people to remain unemployed for a year.
Ge Mo, the head of a U.S. game startup team, told Game Teahouse that after one of his friends was laid off, it took him six months to find a new job in another city. However, just three months later, the entire new studio was shut down.
Ge Mo felt deeply sorry for his longtime colleague: in his early 40s, burdened with a mortgage, he had moved to a new city with his family to find work, only to be laid off just as he was settling in. “It was a huge blow, to say the least.”
It is important to note that U.S. law does not require companies to provide financial compensation to laid-off employees. However, most companies do offer several months' salary as compensation.
For laid-off workers who are unable to secure new job offers from major tech companies, the options available to them are actually quite limited. Some return to academia to teach, others switch to different industries, but the majority end up taking on freelance work.
The most telling sign is that when Ge Mo attends industry conferences like GDC, he encounters an increasing number of new outsourcing teams. Even some indie game teams, unable to find publishers for new projects, are trying their hand at art and development outsourcing to keep their teams afloat.
More and more new faces from the outsourcing industry are appearing at GDC
However, due to a sharp decline in the number of new projects from upstream vendors, actual demand for outsourcing remains weak. The North American outsourcing market as a whole is oversaturated, with far more suppliers than available opportunities.
“This situation has been going on for three years now,” Ge Mo concluded with a sense of regret.
02
It’s been five years, and workers in Europe and the U.S. still haven’t returned to the office
Even as of 2025, game developers in Europe and the United States still allow their employees to work remotely, rather than requiring them to come into the office every day.
Take Ge Mo’s team, for example: they require employees to come into the office at least three days a week. However, they do not require employees who have moved to other cities to return to the office.
During the pandemic, people across various industries in Europe and the U.S. believed that offices would no longer be necessary in the future. As a result, many professionals moved to other states and prioritized remote work when changing jobs. Ge Mo knows a developer at a major tech company who moved to scenic Hawaii to live.
Remote work lacks the atmosphere of dedication to the task at hand, and collaboration and communication are difficult, which inevitably reduces work efficiency. GeMo estimates that, compared to working in an office, remote work reduces team efficiency by about 30%.
The single-player campaign for *Battlefield 6* was originally developed by Ridgeline, led by the producer of the original *Halo*. However, after two years of development with little oversight, EA did not realize until 2024 that the project’s quality and progress were significantly behind schedule. EA was forced to shut down Ridgeline and brought in three other studios to take over the *Battlefield 6* single-player campaign.
Ridgeline's work has been scrapped and does not appear on the Battlefield 6 developer list
I think remote work bears some of the blame for the disastrous performance of *Battlefield 6*’s single-player mode.
Times have changed, and the industry is facing a downturn. Major companies in Europe and the U.S. have realized that remote work is inefficient and that continuing with it only drives up operating costs, so they have begun requiring employees to return to the office.
However, the freedom that companies have granted is now extremely difficult to take back. There is significant resistance from employees.
Microsoft plans to implement a policy requiring employees to work in the office three days a week starting next February; EA is also requiring employees to work in the office at least three days a week and has halted hiring for remote positions, though it has established a transition period ranging from several months to two years; Rockstar has required the entire *GTA 6* development team to return to the office since April of this year.
GTA 6 has been delayed again
While game developers are taking a gradual approach to bringing employees back to the office, media giants such as NBC and Paramount are taking a more aggressive stance, requiring employees to work in the office for all five workdays. Employees who refuse may opt for a "voluntary separation package."
Wei Cheng, a senior business executive at a major tech company, believes that the freedom afforded by remote work is considered politically correct in Europe and the United States. He once saw a job posting from a British game developer that highlighted a "four-day workweek" policy.
“If I were looking for a partner, they certainly wouldn’t be my first choice.”
03
What exactly is wrong with the Western video game industry?
The video game industry in Europe and the United States is currently undergoing the longest bubble burst in history, with no end in sight.
Major European and American game developers are also deeply at a loss, unsure of what players want and producing games that fail to appeal to them; fearful of market risks, they are hesitant to launch new AAA projects.
In this round of overseas restructuring, whether they are leading companies or smaller teams, any project with a projected negative ROI is facing significant pressure to cut staff.
What’s even more ironic is that while major tech companies in Europe and the U.S. are laying off more and more employees, their stock prices keep soaring. What is the root cause of this surreal situation?
Aggressive expansion based on optimistic projections
During the pandemic, the explosive growth in gaming revenue sparked boundless imagination among developers. Fueled by extremely optimistic expectations for the future, developers embarked on aggressive expansion, continuously acquiring small and medium-sized teams, launching large-scale AAA projects, and expanding their teams.
Between 2020 and 2023, the relatively unknown Embracer Group spent a staggering $12 billion on a frenzy of acquisitions of various game development teams. Not to mention Microsoft, which acquired Activision Blizzard for a record-breaking $68.7 billion. By comparison, Sony’s $3.6 billion acquisition of Bungie now seems like a bargain.
Embracer, known for its spending spree, is restructuring due to a financial crisis
Aggressive expansion has led to a large number of redundant employees while exacerbating the fragility of cash flow.
Several new games failed to meet sales expectations upon release, leading publishers to realize they had severely overestimated the market size; they quickly scrapped projects and laid off staff to protect their businesses.
The 3A business model is on the verge of collapse amid rising inflation
According to previously leaked Sony documents, the development costs for AAA games released between 2020 and 2022—including *The Last of Us Part II* and *Horizon: Forbidden West*—have exceeded $200 million.
Given that U.S. inflation surged to 8–9% in 2022 (according to Federal Reserve data), the cost of developing another AAA game will likely reach at least $300–400 million by 2025.
Price increases in the United States since 2020
Game development costs have nearly doubled, while the retail price of games has risen by only $10 over the past decade. As a result, the break-even point has risen from 5 million copies to 10 million copies.
Yinhua, a veteran Chinese developer based in the U.S., told Game Teahouse that when he first arrived in the U.S. to attend college, a cup of coffee cost $1.50 and a video game cost $60; now, coffee costs $6—a fourfold increase—while the price of video games has risen by less than 20%.
“Not to mention that the PS2 sold over 150 million units worldwide back then, whereas the PS5 has just surpassed 80 million units—that’s nearly half as many users.”
Game developers had considered raising prices further—they even floated the idea of hiking the price to $100 to gauge market acceptance. However, the backlash from players was so strong that they had no choice but to abandon the plan.
In Yinhua's view, the business model for AAA games has fallen into a predicament similar to that of the U.S. film industry.
Movie ticket prices in the U.S. have risen from $12 to $17 over the past 20 years, but production costs have skyrocketed more than eightfold. This has forced Hollywood to rely solely on 60-year-old veteran actors and produce sequels to established franchises, all out of fear of losing money.
The harsh reality is that whether it’s a movie or a AAA game, even if the first and second installments turn a profit, a single loss-making third installment can wipe out all the profits accumulated from the first two.
“I’m at my wits’ end with the buyout system.”
R&D operations are shifting to lower-cost regions
Mature, off-the-shelf game engines have objectively lowered the barrier to entry for AAA game development, making AAA developers in Europe and the U.S. no longer a scarce resource.
It’s worth noting that in the United States, a developer with 10 years of experience can earn an annual salary of approximately $140,000 (the median U.S. household income in 2024 is $80,000), which is far higher than in other countries.
Since game development is so expensive in the United States, game companies are shifting their development resources to other, lower-cost regions. As a result, “collaborative development” has become the norm, with European and American companies outsourcing more and more development work to teams in Eastern Europe, China, and India, while further downsizing their North American teams.
The developer of India 3A also started out as an outsourcing firm
04
Are Chinese companies setting up overseas studios just throwing their money away?
In recent years, leading domestic tech giants such as Tencent and NetEase have accelerated their efforts to recruit renowned developers overseas to establish new studios, only to scale back these initiatives during this round of restructuring.
Let’s set NetEase aside for now. Tencent has also shut down TiMi’s Team Kaiju (FPS project) studio, and Sumo Group, which it acquired, has undergone two rounds of layoffs.
Tencent TiMi has shut down Team Kaiju
This phenomenon has drawn ridicule from the public: Tencent and NetEase have paid top dollar to hire big names from overseas, yet have seen no results, making them look like suckers.
Wei Cheng, a senior business executive at a major game developer, told Game Tea House that Chinese companies had previously accelerated their overseas expansion efforts during the suspension of domestic game licensing approvals. These major companies sought to establish a backup R&D presence overseas, expand into international markets, and hedge against the risks associated with relying on a single market.
Wei Cheng admits that it is difficult to distinguish among established developers—whether their past achievements stem from the platform or their own individual abilities. This can only be tested through practice.
“This is a process in which Chinese companies are investing to build brand awareness and dispel misconceptions among overseas developers—and it will prove beneficial in the long run.”
Wei Cheng believes that in the future, major domestic companies may increasingly rely on the local insights of European and American teams to deepen their understanding of local markets, but the final decision-making authority over products will remain in their own hands.
Chinese game developers’ forays into overseas markets are bound to encounter setbacks, but a short-term pullback does not mean the entire endeavor should be written off. Through close collaboration with international talent, major studios are gradually gaining a deeper understanding of the global market.
原创文章，作者：游茶妹儿，禁止转载：https://youxichaguan.com/en/archives/194636
