Epic Games, the company behind the popular Fortnite video game, is cutting around 870 employees.
Sources said the layoffs will impact around 16 percent of its workforce.
CEO Tim Sweeney said: “For a while now, we’ve been spending way more money than we earn.
“I had long been optimistic that we could power through this transition without layoffs, but in retrospect I see this was unrealistic.”
The key driver of Epic’s recent growth has been the Fortnite Creator program, allowing players to create and sell in-game content.
While successful, this initiative offers lower profit margins than traditional revenue sources like character skins.
These lower profits are insufficient to sustain the company’s current size.
The layoffs come as a significant structural change to Epic’s business model due to the success of the creator ecosystem.
The company has over 400 million users and is known for the Unreal Engine, a widely used game development technology suite.
However, the financial challenges have necessitated these workforce reductions.
Headquartered in Cary, North Carolina, Epic Games has become one of the largest privately held video game companies globally.
Looking to boost your online brand? Create your FREE business profile at WhatBiz? Here.
Sweeney said there are no further layoffs planned.
The company is also divesting itself of music site Bandcamp, acquired last year.
It’s also spinning off marketing company SuperAwesome, which joined Epic in 2020, resulting in an additional 250 departures.
Sweeney said most of the job cuts at Epic Games fall outside the “core development” teams.
Need Career Advice? Get employment skills advice at all levels of your career
The gaming industry has witnessed a wave of layoffs in the past year, mirroring broader trends in the tech sector.
Companies like Embracer Group AB and Niantic have also resorted to layoffs to adapt to changing industry dynamics.
Employees affected by Epic’s layoffs will receive six months of severance pay, health insurance, and accelerated stock vesting.