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Gaming industry layoffs: Key catalysts

The gaming industry has seen over 7,800 employee layoffs this year, already more than half the 2023 total. With gaming giants Sony (SONY) and Electronic Arts (EA) making the latest round of layoffs, investors wonder whether the sector may be reaching a breaking point.

Yahoo Finance tech editor Dan Howley joins the Live show to share drivers of the layoffs, comparing these developments to 2023's tech industry layoffs.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

- Switching gears a little bit, layoffs are plaguing the gaming industry. This year, the latest rounds coming from Sony and Electronic Arts. But the 2024 numbers are closing in on the total from last year. For more on the gaming industry, we're going to turn to Yahoo Finance's Dan Howley.

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And Dan, I know that you had to leave the kitchen the other day when we were talking to go cover some of these layoffs. But I'm curious about what you're learning in your reporting about the kind of catalyst for these continued layoffs. We saw them happening over the course of last year and now they're continuing again. Is this a sign that things are sort of at a breaking point for the gaming industry?

DAN HOWLEY: Honestly at this point, it's somewhat difficult to say, we're seeing layoffs as you said Sony and EA the latest. So far, there's been several thousand layoffs across the video game industry. And really what it comes down to is a kind of confluence of factors.

The basic understanding is that it's a kind of similar trajectory that we've seen with the tech industry but at a slower pace, where last year we had seen these huge layoffs in tech and then a slowdown in the layoffs. We saw layoffs in the gaming industry last year as well but now we're seeing that continue.

And part of it, again, has to do with the huge amount of growth that had happened at the beginning of the pandemic. Gaming companies seem to have been riding that high, thinking similar to tech companies that the kind of good times for them-- obviously not good times because of the pandemic, but for their bottom lines wouldn't end. That clearly not being the case.

We've seen growth flatten out decline entirely in some instances across mobile games, PC games, and console games. And because of that, they're scaling back a number of plans. There's also the issue with interest rates at this point, money isn't as cheap as it was. Games cost a lot of money now.

I think the most recent Sony game from them, their spider-man two cost $300 million to make. And so we're seeing this kind of bloat as far as pricing goes continue to push that higher. Money not as cheap, it's difficult for those games to be made. That also makes hit or miss games, not necessarily a risk that companies want to take. They want surefire bets.

On top of that, there's two other factors. There's the kind of difference that we're seeing as far as gamers go and where they play. Younger gamers want to play on tablets and smartphones. That's impacting some of the consoles and PC sales.

And then-- oh, yeah, there's gigantic games so-called Black Hole games, live service games, like the Call of Duty, the Roblox, the Minecraft, the Fortnite that pull people in for hours on end, takes them away from other games that might otherwise have shined.

- Very interesting stuff from reporter and avid gamer, Dan Howley. Thank you so much. Appreciate it.