How the Gaming Industry Can Level Up Workforces with AI

Like many businesses, the gaming industry is experiencing significant turbulence in recent years marked by strategic shifts and economic challenges. In 2023 alone, the sector saw more than 10,000 job losses across the United States, the United Kingdom, Canada, and Japan. This troubling trend continued into 2024, with nearly 8,000 additional layoffs in just the first few months. These aren’t merely statistics; they signify profound changes within the industry, affecting both the titans and the upstarts of the gaming world.

For instance, Microsoft’s acquisition of Activision Blizzard for $68.7 billion started in part as a way to turn the software giant into one of the largest gaming companies, too, along with Tencent and Sony. Despite these ambitions, though, Microsoft faced substantial economic headwinds, forcing the company to layoff a significant part of the workforce in response to slowing revenue growth.

So you might find yourself wondering: "It’s the gaming industry. Why can’t companies just prioritize creativity and fun over economic motives?"

Sure, it’s fun for consumers, but not always for organizational leadership. The business models prioritize strategies that maximize player value often at the cost of employee job security.

This pattern of layoffs, usually timed just before the end of the year or early in the year, is not just a tactic to trim budgets but also a reflection of deeper systemic issues. These include rapid growth followed by market contractions, strategic blunders, and the harsh realities of economic downturns post-pandemic. Companies including the Embracer Group and Unity have made significant missteps, from overzealous acquisitions to alienating their communities with new fees, respectively.

There has to be a better way — and perhaps the answer lies in technology.

Is there a potential for integrating AI technologies, especially large language models (LLMs), that shines as a beacon of hope on the horizon? Could AI be the key to sustaining productivity with fewer employees, or does it present new ethical and copyright concerns that need careful consideration?

As we explore potential workforce transformation strategies that can guide gaming industry through these uncertain times, a few questions arise:

• How can the industry change its approach to workforce management and technology adoption to thrive in an AI-dominated future?
• What lessons can be learned from recent upheavals to ensure a more sustainable and innovative way forward?

Let’s explore how the gaming industry can prepare for an AI future.

Reasons for Workforce Cuts in the Gaming Industry

Rising development costs, technological advances such as AI and automation, economic pressures, and changing labor relations cause mass layoffs in the gaming industry. Here's a closer look at the reasons for these workforce reductions, as well as insight into the challenges and strategic decisions shaping the industry.

Escalating development costs

A significant driver of layoffs in the gaming industry is the substantial increase in development costs. Previously, budgets for blockbuster games averaged $50-$150 million but have recently escalated to $200 million and beyond. This surge in expenses is pushing companies to streamline operations and reduce headcount. High-budget titles like “Call of Duty” and “Grand Theft Auto” now exceed $300 million, which leads to a cautious approach focused on established intellectual properties, often at the expense of innovative new projects.

Impact of AI and automation

Ma Huateng (also known as Pony Ma), co-founder and CEO of Tencent, signaled a strategic shift in November 2023, moving away from smaller businesses and focusing on investments in artificial intelligence.

Integrating AI and automation into game development is profoundly reshaping the industry. AI’s capability to replicate voice and kinetic performances threatens traditional human roles, such as those of video game actors, by enabling companies to produce content without human actors.

This leads to many problems, including significant layoffs and intellectual property or security issues. And in the wake of the recent Hollywood writers strike, there is great potential that the gaming industry’s CEOs may also face this.

Industry strikes and labor negotiations

AI has also sparked contention in labor negotiations, particularly highlighted during talks by SAG-AFTRA, advocating for better control over using and replicating actors’ likenesses and performances in video games. The potential for strikes looms as actors seek to secure protections against the exploitative uses of AI, similar to their counterparts in the film and TV industry.

Economic pressures and restructuring

Economic challenges are compelling companies to reassess their business strategies. Twitch, for instance, announced a 35% workforce reduction as part of a broader initiative to develop a more sustainable business model. This decision followed rising operational costs and shifting market dynamics, such as increased network fees and unprofitable ventures, despite growing user bases since the pandemic.

Unionization and workers’ rights

Amid these disruptions, there’s a growing movement toward unionization within the industry. Workers seek better terms and protections, including fair wages and job security in the face of automation. This push towards unionization reflects a broader demand for equitable treatment in an industry facing profound changes.

For instance, workers at Activision Blizzard are starting to unionize, which puts video game actors on a better playing field. Let’s remember the 2016 video game actors’ strike did affect the development of a handful of major titles, such as "Life Is Strange: Before the Storm" and "What Remains of Edith Finch."

Workforce Planning Strategies for the Gaming Industry

To help organizations in gaming and other industries navigate global uncertainties and changing technology, TalentNeuron specializes in strategic workforce planning and transformation. Our data-backed solutions help companies predict future skills needs, identify gaps in their current workforce capabilities, and make informed decisions about whether build, borrow, or buy talent. This approach empowers organizations to align their workforce strategies with long-term growth goals and market demands, potentially preventing future layoffs while ensuring the right talent is place to adapt with gaming developments.

TalentNeuron's talent intelligence can also play an essential role in helping companies understand and implement AI and automation technologies in ways that complement — not replace — human creativity and innovation. By analyzing job roles and workflows, TalentNeuron can identify opportunities to automate operational tasks, freeing people to focus on the creative and strategic activities that drive game development. This balanced approach to AI integration can help game companies improve efficiency while maintaining the creative spark central to creating exciting games.

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Here are a few other scenarios where data and insights might guide gaming industry decisions:

Skyrocketing development costs

As development costs costs rise, skill analysis and competitor benchmarking capabilities help HR teams understand the changes in the labor market due to generative artificial intelligence (GenAI) and other breakthrough technology. TalentNeuron facilitates effective talent acquisition and skill development by providing real-time market data and detailed information on job roles and requirements. This streamlines hiring and learning processes, helping organizations maintain a competitive advantage while also managing costs.

High costs of streaming and content distribution

By applying artificial intelligence and machine learning to talent inventories, organizations can categorize and match training content to specific company needs, addressing relevant skill gaps and supporting employee upskilling and reskilling. This targeted approach curbs unnecessary costs and ensures content distribution aligns with strategic business goals.

Strategic shifts toward AI and automation

Data analytics provide insight into workforce dynamics and industry trends, helping organizations identify roles and new skills suitable for automation. Proactively address skill gaps through targeted hiring or training programs, matching employee skills with the changing requirements of AI-enhanced roles.

Merck Group, for example, leveraged TalentNeuron data to predict the impact of automation and align workforce strategy with digital health advances. Deutsche Telekom also partnered with TalentNeuron to create AI-enabled learning pathways, preparing employees for AI-enhanced roles. This strategic foresight has enabled these companies to integrate AI technologies and automation effectively and streamline operations while maintaining competitiveness without losing talent.

Integration of new technologies

Keep on the forefront of new gaming technology by analyzing labor market trends and competency requirements to better equip your workforce. TalentNeuron technology captures nearly 2 billion data points daily from job profiles and other diverse sources across industries, enabling HR teams to identify current talent needs and predict critical future skills. For gaming companies, this means learning about the latest technology skills and integrating them into quality management and other department functions.

Labor negotiations and strikes

Gain deeper insight into industry trends, skill requirements, salary benchmarking, employer branding, and more to continually assess workforce needs. This strategic approach helps reduce the risk of strikes by addressing workers’ critical concerns about skill relevance and fair pay. It also improves worker morale by demonstrating a commitment to their professional growth and well-being.

Economic pressures and downsizing trends

Navigate economic pressures with detailed labor market and location analysis solutions. Make well-informed decisions about where to open new operations or consolidate existing ones, focusing on locations that offer access to skilled and cost-effective talent. Jabil's comprehensive analysis of TalentNeuron location data, for example, helped focus strategic workforce decisions for acquiring talent in competitive areas.