Epic Games is slashing its workforce by 16%, laying off about 830 employees, as it looks to cut costs and put the Fortnite maker on viable financial footing.
The cutbacks were announced in an internal memo from Epic CEO Tim Sweeney. In addition to the layoffs, the company is selling Bandcamp the music store and community platform it acquired in 2022, and will spin off most of SuperAwesome, the kids’ digital marketing company Epic bought in 2020.
“For a while now, we’ve been spending way more money than we earn, investing in the next evolution of Epic and growing Fortnite as a metaverse-inspired ecosystem for creators,” Sweeney wrote. I had long been optimistic that we could power through this transition without layoffs, but in retrospect I see that this was unrealistic.
While Fortnite is starting to grow again, Sweeney continued, “the growth is driven primarily by creator content with significant revenue sharing, and this is a lower-margin business than we had when Fortnite Battle Royale took off and began funding our expansion. Success with the creator ecosystem is a great achievement, but it means a major structural change to our economics.”
After multiple moves to reduce costs, including moving to “net zero” hiring and cutting spending on things like marketing and events, Epic “still ended up far short of financial sustainability,” according to Sweeney. “We concluded that layoffs are the only way, and that doing them now and on this scale will stabilize our finances.”
Epic is selling Bandcamp to Songtradr, a music marketplace company that supports artists, for an undisclosed price. In addition, SuperAwesome’s ad business will become an independent company under the SuperAwesome brand, led by current CEO Kate O’Loughlin. Kids Web Services (KWS), the parent-verification and consent-management toolset, will remain part of Epic. Around 250 people are leaving Epic through the divestitures from Bandcamp and SuperAwesome.
In April 2022, privately held Epic said it had a post-money equity valuation of $31.5 billion following a new round of investment from Sony and KIRKBI, the family-owned holding and investment company behind the LEGO Group, which each investing $1 billion. Epic remains controlled by Sweeney.
Epic Games has been waging a multiyear legal fight against the app stores operated by Apple and Google, alleging they are monopolies that use anticompetitive practices. In an FAQ for employees about the cuts, Epic noted, “We’ve been taking steps to reduce our legal expenses, but are continuing the fight against Apple and Google distribution monopolies and taxes, so the metaverse can thrive and bring opportunity to Epic and all other developers.”
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