PlayStation shutters London Studio: Video Games Industry Memo, 29/02/2024
We can't lay off the layoffs, it seems
Sony Interactive Entertainment lays off 900 staff and shutters its London Studio
World Trade Organization discusses duties on the sale of digital games
Final Fantasy VII Rebirth leads a week stuffed full of remakes
Good morning all,
It’s going to be a heavier issue of Video Games Industry Memo this week which is why I want to open proceedings with a light, but important, question: how do you actually pronounce VGIM?
For a while, I briefly toyed with the idea of saying each letter of VGIM out loud. But every time I did it, I felt like I was singing the chorus of the song DVNO by Justice - France’s answer to the question of “what happens if we did Daft Punk again, but a little bit worse this time?”
Therefore, I decided that the correct way to pronounce VGIM is ‘vee-jim’.
Yes, this pronunciation may not strictly match the letters that form the acronym. But it is easy to remember and has a sing-song quality to it akin to a well named pet Labrador, so that’s what I’m sticking with for now.
If you are furious about the pronunciation and would like to write me a sternly worded email about it, pop me a message to videogamesindustrymemo@substack.com and I promise I won’t get back to you.
Now though, we must turn our focus to sadder news coming out of one of the major players within the industry.
The big read - PlayStation shutters London studio
“Over the years London Studio has pioneered new gaming experiences.
Our story is still being told...”
PlayStation’s London Studio has these words up on its website, in the section where it outlined both its two decades of industry leading development work and its optimistic vision for more great games to come.
Unfortunately though, the story of London Studio came to an end earlier this week. It became the latest high profile victim of the industry’s crunching sector wide reset, with it earmarked for closure as part of a restructure of PlayStation’s wider business.
It is a sad end for one of the most well respected studios in the UK games industry. The outfit, which was responsible for games such as The Getaway, Singstar and VR title Blood and Truth, had established a reputation as one of the most inventive parts of PlayStation’s global business: creating fantastic games that broadened our expectation of what we would experience on a Sony device.
Yet despite this innovative approach, the company has not survived Sony’s strategic shift - raising questions about what comes next for PlayStation and the wider industry.
No use Ryan
So, what actually happened this week? On Tuesday afternoon UK time, Jim Ryan, President and CEO of Sony Interactive Entertainment (SIE), published a gobbet of corporate niceties and the text of an internal email which announced the company’s intention to reduce its global headcount by 900 - equivalent to 8% of its workforce.
Ryan’s post, which was released under the ominously corporate headline of Difficult News About Our Workforce, argued that the company needed to “future ready [future proof] ourselves to set the business up for what lies ahead.”
Ryan announced a company-wide restructure affecting “several PlayStation studios” that would have “impact for employees across all SIE regions”.
And while PlayStation’s companies in the rest of the world waited anxiously for separate messages to confirm their fate - such as the one shared by Herman Hulst, Head of PlayStation Studios, to its US employees - the UK side of the business discovered its fate publicly via Ryan’s initial release.
He explicitly outlined plans to propose the closure of its London Studio (which is a necessary formality within UK employment law, rather than a genuinely open negotiation), alongside a reduction in the headcount in PlayStation’s Liverpool based Firesprite Studios.
The news has understandably stunned employees within the business. From what I’ve heard, the announcement was unexpected - especially because Ryan had cheerily posed for photos with staff on a visit to the studio barely a week ago.
But while the way the news was delivered was shocking, there is enough evidence available publicly to understand how a beloved studio unexpectedly found itself in the crosshairs for cuts.
Cause and effects
The full reasons for the closure of London Studios have not been disclosed and likely never will be. However, I think there are three main reasons why it became the unwitting victim of a change in PlayStation strategy.
First, Sony has fallen foul of the same post-pandemic optimism that has afflicted the wider industry and has landed itself in a position where it must reduce costs.
As covered in last week’s VGIM finance cheat sheet, the company reported that it was set to fall short of its 25m sales target for the PS5 in this financial year by a hefty 4m units and that its operating profit in the last quarter fell by 26%. In this context, belt tightening has become inevitable - setting the company on course for job cuts.
Second, the supplementary parts of PlayStation’s business that have traditionally supported its core console offering have also underperformed.
In an interview last year. Eric Lempel, Sony Interactive Entertainment’s Global Head of Business, claimed that PlayStation’s virtual reality business was proving to be “a bit of a challenging category” for the company - despite significant investment into both the first and second generation of PSVR devices.
This has proven financially damaging to both the wider business and the viability of PlayStation’s peripheral business beyond devices such as the PlayStation Portal - which simply makes the core PS5 experience portable within the home.
And while London Studio was not responsible for the sale of such devices, its long history of developing great games for Sony’s supplementary devices (e.g. EyeToy: Play for the PlayStation 2) may have led to an unfortunate association between the studio and a flagging part of the hardware part of the games business.
Third and finally, Sony’s efforts to extend itself further into mobile and PC has proven disadvantageous to its existing studios.
The shift in direction is not an entirely new thing for the business, of course. The company has started to release flagship titles such as God of War on PC, while it is currently running tests that will ensure that its second generation VR headset runs on PCs by the end of the year.
Sony Interactive Entertainment has also made deliberate long term strides into mobile too, with mobilegamer.biz’s report into this week’s layoffs suggesting that its mobile arm Neon Koi appears to have been unaffected by the redundancies.
However, the company’s communications around this week’s job cuts made it clear that it felt its traditional strengths - such as narrative driven single player adventures and innovative hardware led game experiences - didn’t fit with its plans to cross over the platform divide.
Hulst’s memo to US staff, for example, suggested that “launching games on additional devices such as PC and mobile requires a different approach and different resources”.
This explains why pretty much all of PlayStation’s existing businesses were hit by layoffs this week. Even prestige studios such as Guerrilla Games and Naughty Dog, who have been responsible for industry defining franchises and hits like the Horizon series and The Last of Us, suffered cuts.
But for the London Studio in particular, it appears as if its historic strengths - including its reputation for making fantastic creative experiences for the peripheral technologies that helped prop up the core PlayStation business - inadvertently became a weakness as the company shifted strategy.
This likely put it on the chopping block - condemning it to closure before it had the chance to release the unannounced multiplayer title it was working on that felt like a natural fit with Sony’s new games strategy.
Ending the bloodbath
I’ve talked a lot about what all this means for PlayStation so far. But where does another painful round of job cuts leave the games industry? Truthfully, it puts us in a difficult position.
At the start of the year, I argued that 2024 would be hard but that there was room for optimism regarding a possible bounce-back from 2023.
I suggested job cuts would continue at the start of the year and they would be tough to handle, but that the pain would dull as we progressed into the year and towards the early development days of the next console generation.
I also believed that what looked to be a relatively quiet year for game releases would get busier, with hero announcements such as the predicted launch of Nintendo’s Switch successor and hype around Grand Theft Auto 6 - 2025’s big release and a banner moment for PlayStation too - would put fuel in the industry engine.
My assessment has changed over the past two months. The extent of the job losses has been more painful than many predicted, with 8,000 people losing their jobs this year so far - only 2,000 fewer than the total lost across the whole of 2023.
The hero announcements that were meant to ride in to save the year look as if they aren’t arriving in time for 2024, with a reported delay to the launch of the Switch 2 to Q1 2025 dampening expectations of a much needed end of year uplift.
And although 2025 is looking like it is becoming even stronger because of those delays, it also means that 2024 looks less like a year where we steadily dust ourselves off and more like a year where we’ll really need to fight to get back on our feet.
There are still some reasons for optimism. Macroeconomic factors that have battered the global economy, such as inflation, have been mostly accounted for. The microeconomic collapse of the games industry’s investment-led pandemic sugar rush is on the brink of being priced in. We also still have plenty of room to grow the industry, given that we are still decades away from a point where everyone in the world has grown up with video games.
But morale matters to the fortunes of just about any industry and we are, unfortunately, running short on it.
The shuttering of London Studio, whose fabulous office in the heart of Soho is a much loved industry landmark that I stroll past on a near basis, feels like a bit of a hammer blow in what has been an already hard start to 2024.
So to misquote Hamlet, things do feel rotten in the state of the video games industry at the moment. And while this feeling will pass, it is important that we don’t forget it to ensure that we build a more sustainable sector in years to come.
News in brief
Doing their duties?: Members of the World Trade Organisation (WTO) are considering ending a nearly 30 year long moratorium on imposing duties on e-commerce sales, which covers “electronic transmissions” such as the sale of digital video games across borders. The US is strongly in favour of extending the moratorium, while the likes of South Africa and India oppose its continuation to allow them to impose duties as a way to help shut the digital divide.
Not so Supermassive: As if the PlayStation job losses weren’t enough, a wide range of games businesses also embarked on layoffs this week. Supermassive Games announced plans to cut 90 members of staff in Guildford. Esports organisation ESL FaceIt reported that it is cutting 15% of its workforce. And last night Electronic Arts announced it is also laying off 670 people - a final dribble of piss all over everybody’s chips this week.
Awkward Squad: Warner Bros has admitted that Suicide Squad: Kill the Justice League has fallen short of expectations in its most recent financial results. Gunnar Wiedenfel, CFO at Warner Bros Discovery, did not cite specific sales figures but suggested that year on year numbers for the games part of the business would look grimmer than expected given the blowout success of Hogwarts Legacy this time last year.
Apple Narked-cade: Apple’s ongoing efforts to irritate the entire mobile games industry continues, with a report from mobilegamer.biz highlighting developer unease over reduced payments and interactions from the team managing the company’s Arcade subscription service. While some developers continued to express their happiness with Arcade, the quote that suggests there’s “a smell of death” around the service proffered by one developer is both a) memorable and b) an excellent name for a spoof James Bond movie.
Getting Twitchy: Here’s an odd one for you - Twitch has been fined the best part of $300,000 by the Korean Communications Commission (KCC) for suspending its video on demand service in the country despite the fact that it is exiting the territory. The KCC said that its decision to suspend its service violated local telecommunications law protecting the interests of users, while Twitch continues to dispute that it offers independent telecommunications services at all and points at its plans to leave the territory as reasons why it shouldn’t be fined. To conclude: it’s weird, alright.
On the move
London Studios closure means there is a lot of great talent within the VGIM network looking for new roles…Louise Chamberlain is a Senior Technical Producer hunting for technical production and production roles...Callum Langstroth wants to turn his Senior Narrative Design experience towards other narrative design or game design projects…Dave Rogers is a Senior AI Programmer who has previously worked at Ubisoft, Bossa Studios and Team 17…And Lana Zgombić is a delight and also a Producer who is now seeking a new production role…
In other job news, Luke Karmali is the new PR & Communications Director at Larian Studios…James Whatley has hung up his Chief Strategy Officer hat at Diva Agency…Dean Smith is the new Commercial Director at Bastion and Dan Wood has been appointed Director of the Company’s Folgate B2B branch…And Jake Tucker has been promoted to become the Editorial Director, PC Gaming Show at PC Gamer…
Jobs, jobs, jobs
Chelsea FC are looking to wash down its failure to win the Carabao Cup by appointing a Partnerships Ideation Lead who, yes, may benefit from games experience…Zynga is searching for a Lead Product Manager - Racing to support its CSR Racing studio in fair London town…Havas Media has an Account Manager - Gaming role going for anyone with an interest in working on social campaigns…Meta wants a Creative Strategist Gaming App Specialist who is a fluent Arabic speaker for reasons that we can probably all guess…And TikTok is hiring for a Global GTM Marketing Manager for its Global Gaming Team who has events experience and knowledge of the games media landscape…
Events and conferences
Pocket Gamer Connects, San Francisco - 18th-19th March
Game Developers Conference, San Francisco - 18th - 22nd March
Mobile Games Intelligence Conference, London - 27th March
London Games Festival, London - 9th-25th April
London Developer Conference, London - 11th April
BAFTA Games Awards, London - 11th April
Games of the week
Final Fantasy VII Rebirth - The second part of the trilogy remaking Final Fantasy VII arrives to sell enough copies to save the games industry (probably).
Star Wars: Dark Forces Remaster - Kyle Katarn’s back! And this time *checks notes* his textures have been upscaled for a modern audience.
Brothers: A Tale of Two Sons - Save Dad from bad (illness) in this dual controlling, brothers based remake.
Before you go…
Far Out has released a breakdown of Lana Del Rey’s hit Video Games, explaining what went into her heartbreaking hit about a partner more interested in video games than her.
What’s not included in the piece? The fact that space RPG opera Mass Effect 2 came out in 2010, just a year before the track first released in 2011.
Was Lana’s partner actually so engrossed in the game that he fell out of love? Or was he knee deep in plans to romance slithery monk-like assassin Thane and couldn’t tell her what he was up to?
I know what I’m thinking, that’s for sure…