LucasArts Massive Layoffs! WTF?

[the_podman]

Some disturbing news about LucasArts. I know some fellows there, hope they still have their jobs:

http://kotaku.com/5013710/rumor-lucasarts-sees-massive-layoffs-outsources-jobs-%5Bupdated%5D


I'm seeing more and more artists "freelancing" these days including myself. I don't know how it is with the rest of the world, but out here in the Bay Area, getting permanent studio jobs seems to be getting tougher. Apart from freelancing, I work at a Digital Art school and our job placement ratio has taken a serious nose dive lately.

Curious to know where the "future" of game jobs is headed. With 3d tools getting much easier to learn, more and more artists are springing up from the woodwork. How do you guys think salary rates are going to turn out in the next couple of years? Are we reaching a plateau with lucrative game pay? Is outsourced, "on the cheap" game-art labour the future of it?

Your thoughts..

[cookepuss]

How do you guys think salary rates are going to turn out in the next couple of years?
That's like predicting the weather, iffy at best.

From a financial perspective, the USA economy is probably the worst its been in about two decades. It's never great to hear about massive layoffs, but they're a tragic necessity. Sometimes, you have to amputate the limb for the patient to survive. In the case of a big corporation, sometimes, the best way to keep the business running and profitable is to avoid the higher salary requirements and taxes of US development in favor of outsourcing or taking the facilities offshore.

Nationwide, the cost of living is rising and rising, but the rates of pay are either remaining the same or simply decreasing. Many companies will fire a higher salaried, more qualified individual in favor of somebody who has less practical experience and will work for less. It's not just in the game industry. It's everywhere. It's going to keep on happening for the foreseeable future.

In the companies where pay itself or job stability isn't taking the hit, benefits are getting touched. Lower quality, no frills health packages. Reduction of employer 401k investment.

It's a complex chain of factors that is ultimately effecting MANY industries. In the comic publishing industry, it's being speculated that the cover prices might go up by as much as 33%, from $3 to $4. Cause? The rising costs of fuel, as it relates to distribution. The cost of food has gone up by as much as 50% in some places. Again, distribution. The cost of movies is predicted to go up too. A number of huge automotive plants have shut down worldwide. The housing market is in the toilet. Interest rates are twitchy. Everybody is being hit on every side and hit HARD.

Like I said, I wish I could say that it's going to get better soon, but it's probably not.

All of the above may seen unconnected to the games industry, but its a complex tapestry. Tack on the fact that competition in the console world is at an all time high and you've got everybody fighting for the same dollar. Only one person's going to get that buck. The loser takes the hit. That's affecting the bottom line.

Think about the chain for a moment.

The cost for oil and other petroleum products are at an all time high. That stuff also goes into the production of plastics. Games and consoles are made from plastics. Games have to get transported, which itself require gas, oil, etc.. Since the price of oil is going up a game company is faced with 2 big choices. Make major cutbacks or pass on the cost to the consumer/retailer.

Passing on the cost to the consumer is an especially risky tactic if you're fighting for market share. If I've got a choice between a game that costs $50 and a game that costs $70, I might think twice about the more expensive one. The company then hurts from a game that doesn't sell at the higher price point. It then hurts due to various debts and even injury to their image/reputation, which is bad if they're publicly trade/owned.

The other option.... Cut costs. Eliminate teams. Change packaging. Move offshore where things cost less and they can abuse a foreign system. Skirt around USA taxes. Merge teams. ETC. ETC. ETC.

Like I said, as long as everybody's suffering, I don't see it getting much better for the games industry.

Freelancing is tough. It's a feast or famine sort of business. You can work for 6 months and earn tons of money. Then, all of a sudden, you can be out of work for 4 months. With more freelancers competing for the same dollar, it's going to be a mess. I can even foresee some people simply leaving the industry just so that they can continue to pay the bills.

Some new smaller studios might start popping up as a result of corporate garbage. Can they survive? Hard to tell. What I can say is that, in a turbulent economy, it won't be easy.

The PC games market might actually benefit from these corporate layoffs. We may also start seeing an increase in alternative distribution channels, with traditional distribution becoming increasingly expensive.

One can only guess.

I feel bad for anybody who's losing their jobs. Even more, I feel bad for their families. It's a tough situation that no amount of spin doctoring can fix at the moment.


As far as this EA decision, with certain people leaving of "personal reasons", that just sounds like the usual corporate BS. Especially where licensing is an issue, the money pie will always be fought over.

EDIT>> Let's also not forget market/demo over saturation. A company like EA produces a lot of good products, but they also produce a number of iffy ones. If there's a lull in profit due to seqeul-itis then the licensed properties are the first ones that are going to take a hit. Cut costs by cutting licensing. Cut costs by cutting the teams dealing with the licensed products. It's a wicked chain. Imagine how many other thing this is affecting and how many other factors are affecting this single one. Plus, there's the issue of corporate bloat from when the economy was good. In a bad economy, it's hard to support bloat and overlap.

[the_podman]

Interesting perspective, cookepuss. Since we are on perhaps the fringe of "digital distribution". Maybe the cost of producing "packaged" games will at least go down.

What I could never understand is why corporate game companies don't offer a "pay cut" option. They'd rather "can" someone who's been there for 5+ years then delicately tell them they need to take a cut in pay. Why not offer the team an option to stay at a lower salary? Is it considered "unprofessional" or is it just bad for Karma?

I agree with a lot of your points. In fact, lots of Americans that I interact with on a daily basic fail to realize that the games market is very "global" right now. It's just a shame to see this happen and there has got to be a better future for talented artists who are now jobless.

I'm just not sure how much of a "hit" game companies like LucasArts are actually taking financially. Do they really need to cut costs so badly that they have to resort to such extreme measures or is this just a case of increasing the bottom line profits at the cost of employee satisfaction.

Insomniac Games is opening a new "smaller team" office in the East Coast soon. Ted Price states that he is trying to encourage modest development teams with a focus on quality original IP. I'd much rather work for a place like them or DoubleFine but it's scary if those kind of places will not be able to stay afloat.


One thing I want to echo that you stated...
Games need to cut "licensing". It's been nothing but bad for the industry in my opinion. Sure, it reels in the masses, but so does WiiFit and it doesn't have a single license endorsement. Nintendo's so rich they could print their own money. Although the flooded Wii games market right now could lead to a terrible crash.(maybe not one so severe as the Atari crash in the 80s, like some are predicting.)

[cookepuss]

Since we are on perhaps the fringe of "digital distribution". Maybe the cost of producing "packaged" games will at least go down.
Maybe. The only problem there is that, on a massive scale industry wide basis, digital distribution is largely untested. Yeah, we've got Steam & whatnot, but I'm thinking bigger. The fact is, bandwidth isn't as unlimited as we're led to believe. With many ISPs capping download traffic, cutting off P2P "abusers", or simply imposing ex post facto restrictions, nobody really knows what the future of digital distribution is going to be or if it'll actually work.

What I could never understand is why corporate game companies don't offer a "pay cut" option. They'd rather "can" someone who's been there for 5+ years then delicately tell them they need to take a cut in pay. Why not offer the team an option to stay at a lower salary? Is it considered "unprofessional" or is it just bad for Karma?
It's a Band-Aid option. It'll fix the financial situation for maybe a quarter or two, but probably not for a full fiscal year. Firing people will enable them to restructure and cut what they perceive to be dead weight, all while maintaining a profit margin that's inline with forecasts.

I'm just not sure how much of a "hit" game companies like LucasArts are actually taking financially.
That's the thing. These "suits" are working not just from numbers about today, but predictions for tomorrow. These predictions aren't always right, but they tend to take action as a preemptive strike. At least the smart ones do, the ones not already bleeding cash.

Nintendo's so rich they could print their own money.
Is that any surprise? They've literally been around for almost 120 years now. There's a reason why they're still a major force.

Although the flooded Wii games market right now could lead to a terrible crash.
The idea of shovelware could be a problem down the line, provided that it's not tempered with solid 1st & 3rd party games. I think that Nintendo is very aware that this is the case. At the same time, a system like Wii largely survives on the fact that most people are there for the 1st party titles anyway, which are almost always A+ quality. I'm not sure how much shovelware from the Wii is hurting the industry when they seen to market to an already rabidly loyal fan base. The shovelware is mostly garbage to bring in the casual gamer. Nintendo probably figures that once they've gotten them hooked they'll stay for the real good stuff.

[LowRez]

Just a question, is this Lucas arts publishing division? because I know travellers tales were the team behind lego indiana jones and SW indiana jones development. and they're owned by warner bros?

edit: ok read the article fully now

According to another source, up to 80% of staff has been laid off in departments such as Production Services, which includes QA and Compliance, with jobs planned to be outsourced overseas. Cuts were also said to be made in development, with art and programming staffers being laid off.

hmmm seems across the board really...

Not surprised, profit margins are all big business see, if they can make it cheaper at a quality that'll sell they will do it. It'll take a good while as cooke says for this downturn in the economy halts and jobs and wages head the other way back towards the good times... (1998-2006) where global economy's were stable (and mostly growing) and the housing market hadn't crashed. and oil was alot cheaper. It's simple economics and theres absolutely nothing we can do if it effects us. The best thing any of us can do is keep working hard on our artwork, and you'll be fine.

[SuperOstrich]

I'm not really informed on global economics, but I don't think foreign outsourcing has much to do with it. Considering the extremely weak dollar at the moment, US companies don't save much by sending the work to China, etc. It's probably very simple: The company wasn't profitable and reduced staff in order to save money. Happens to all companies no matter how big at some point. I highly doubt you'll see a large increase in foreign labor out of Lucasarts after this move.

[Snowfly]

on the contrary... lasjedi.com

they're trying to hit 300 developers this year, most of it junior talent, although there is some mid-level staff in the mix, though they don't command the same salaries as staff in the US.

the studio's focus is supposed to be film, but they're invovled in everything down there... including videogames.
hopefully this isn't the direct cause of the layoffs.

[the_podman]

LucasArts at one point was trying to swing the focus back to original IP and were not going to just crank out Star Wars games, rather just license the brand. I dunno what happened to that. I was sure by now I would see new and innovative titles from them. Perhaps the cut in staff is to shrink the develop team?

[SuperOstrich]

I don't see anything on that site that suggests they're making videogames. I'm sure the studio simply wasn't profitable, and it was probably that way for long enough that they didn't think it would get better soon.

[Snowfly]

SuperOstrich- The site doesn't say so but there is a videogame department in that (huge) facility. It's something friends of mine who work there can attest to, and the Lucas Singapore guys openly talk about at their recruitment drives.

Not arguing that it has anything to do directly with Lucasarts US staff getting the boot though- and non-profitability will always be the main reason for trimming down staff, even while new offshore facilities are being actively built up. All part of the larger trend I guess.

[Vrav]

Perhaps the industry is trying to reach a state where two or three powerful designers can create a game alone, then hire a team of artists and programmers near the end of development to finish it off. I cannot recall where I read that idea, some old blog, but it sounds both horrifying and questionable.

Personally, I consider moving to some European nation. The US is a scary place to be...

[the_podman]

My favorite time period in games right now is the 3rd/4rd year of PS2. Right when Xbox/Gamecube was out also. It was a real sweet spot for games. Lots of good original titles.

I feel that this current gen, game development is getting way too expensive, hence the 10 dollar jump in price per game. Graphically, I was pretty happy with the PS2/XBOX/GAMECUBE. I would have been happy if things stayed at that level for awhile. The Xbox, especially, never really maxed out it's full hardware potential.

I used to play most of the new releases on PS2/Gamecube/Xbox, but these days, I only play a handful of what's currently out there. It's just so congested, I don't know where to begin. I've got like, a million 50% completed games on PC, 360, PS3, PSP, DS, etc... Don't know how anyone finds the time to finish some of this stuff. With a new release these days averaging about 20 hours of gameplay per title(single player games), it's no wonder people don't purchase more games.

I'll say one thing that I know will be very controversial... I think online competitive "multiplayer" really killed some of the market. I personally know several of my friends that only play the same 2-3 games for years because of multiplayer. Also, think of all the people playing WOW.. Lots of those guys and gals are in "another world".. literally 24/7.. You know those fellows are buying new games..

[SuperOstrich]

I don't think multiplayer killed the market, because the market is actually doing quite well. The problem is more like you said....there are so many games that it's really hard to have a standout, successful title these days. Add to that the fact that titles need to sell millions to be profitable with the budgets like they are currently.

Another issue when going over the sales reports is that games only fall into two categories these days: They're either a multi-million seller or they fail miserably. Gone are the days where you could sell 700K or so and call it a "success."

[JacqueChoi]

Sounds strange, but the company I currently work for can make a liscenced piece of shovelware for the DS.

4 person staff (no joke), reused art assets, and rehashed code and 4 months of production time.

$500k payment they get up front.

That's nearly a $400k profit right off the bat, if you don't include the absurd subsidies companies get here in Montreal (roughly 60% of all wages are subsidized by the provincial government)

[Parnell]

Sounds strange, but the company I currently work for can make a liscenced piece of shovelware for the DS.

4 person staff (no joke), reused art assets, and rehashed code and 4 months of production time.

$500k payment they get up front.

That's nearly a $400k profit right off the bat, if you don't include the absurd subsidies companies get here in Montreal (roughly 60% of all wages are subsidized by the provincial government)

Wow i want to start a company in Montreal!
I'm serious too, because I'd make a bad ass game!
:)
B

[Ramseus]

Wow i want to start a company in Montreal!
I'm serious too, because I'd make a bad ass game!
:)
B

Only one game? Aww, you're not helping the market very much :p

[Mattimusss]

layoff's got me and all my artist buddys at handheld games in seattle. I'm now working at a movie theatre throwing film until i can get another industry job... i hope its possible lol.

[menechu]

It's sad to hear. I still to this day play just finishing up my backlog of PS2 games. I always knew once FMVs were obsolete and in game cinematics were viable and more useful that at some point we would find ourselves at the roof of graphical development.

The costs rise all the time. As a matter of fact at the first IDGA meeting in SF that's all eidos mentioned before going into what they plan on working on these next two years.

Perhaps for the people looking for junior positions may be happy. This may be a time where companies may hire less experienced artists rather than picking up someone with an already required standard pay.

[Daniel_C]

I have a feeling smaller publishers in general are going to move out of the Dev business and start farming out titles. Look at code masters new business strategy for instance.
Only EA and UBI have such a large Dev program these days.

I have no idea what it means in the long run but my guess in the short term is it will increase the distance between publishers and developers. With Dev teams making games and getting them promoted by the Publishing company that most suits the game spreading the cost and risks involved over different publishers. Conversely publishers will be pushing to hold onto and make sure any new big I.P can only be published through them. This lowers risk to the Publisher of a failure as they can pull the plug on a project at anytime without worrying about having teams of people sitting on their hands for years trying to find a game idea.

This may actually lead to more new and creative games appearing as a Development company can approach a publisher with a new title that may fit a market the publisher is looking to fill.
See Lost Winds for Nintendo wii ware for instance.


I am not surprised to be honest Microsoft had adopted this strategy a while ago and Sony has recently been slashing its development teams to pieces.

What they intend to do about digital distribution is anyones guess but mine involves channels ala The Disney channel, Nickleodeon, Sky one, The Scifi channel, The comedy channel etc.
That is just my speculation so don't quote me.

So far wii ware, xbox live and steam haven't taken the world by storm so we are in the position of not having a working business model to look at.

[the_podman]

I think WiWare and Xbox Live haven't taken off because of our current internet speed standards. Downloading a 1gb demo is not that practical right now. Once fiber optics internet speeds become the new standard, I'm sure digital distribution will start to flourish.

Eventually, EBgames, Target, etc. will see then end of their bloated profit machine once "packaged" games get phased out. It's absolutely baffling to my mind how much those guys make from really crappy "used" games. I once saw this copy of "Catwoman" for Xbox with about 20 price stickers slapped on it. All from previous users who kept bringing it back to EB.

In Japan, they tried to outlaw the selling of used games in Akihabara but it didn't stick. I guess game companies are trying their best to try and maximize profits during some turbulent times.

I like the idea of "special edition" game releases. It gets my money all the time. I'm a sucker for limited edition "art books".