MONTREAL – On a recent Monday at 10:30 a.m., about a dozen employees at Bethesda Game Studios in Montreal received unsettling news: they would be laid off in two months. This group was part of a larger team of 120 working on the successful action role-playing game “Fallout 76” and the highly anticipated “The Elder Scrolls VI.” Employees were informed through a video conference call by a director based in Maryland and were subsequently locked out of company systems until their departure. Due to confidentiality agreements, the Canadian Press has chosen not to disclose the name of a source who attended the meeting.
This layoff is part of a broader workforce reduction initiated by Microsoft-owned Xbox, as the company announced the impending layoffs of approximately 3,200 employees over the next year. This restructuring comes amidst heightened competition within the video game industry, a sector that has struggled recently to contend with the shifting market dynamics since the surge in demand witnessed during the COVID-19 pandemic.
The video game industry in Quebec, comprising over 300 studios and housing 45 percent of Canada’s 34,000 game developers, stands at a precarious crossroads. The associated economic output of this sector exceeds $1.4 billion annually. Major studios, such as Epic Games, known for the popular game “Fortnite,” and Ubisoft, the world’s largest studio with nearly 4,000 employees working on the “Assassin’s Creed” franchise, have also been significantly affected. Earlier this year, Epic Games cut over 1,000 jobs—20 percent of its workforce—while Ubisoft laid off nearly 140 employees and closed studios in Halifax and Winnipeg. Other developers, including Eidos and Electronic Arts, have announced layoffs in Montreal over recent months.
This series of cuts signals a burgeoning crisis within the industry, attributed to ongoing restructuring by major companies, the emergence of rival interactive entertainment formats, and the increasing influence of artificial intelligence. Philippe Morin, co-founder of the indie studio Red Barrels based in Montreal, recognized the challenges faced, stating, “It feels like it’s a perfect storm; it’s definitely not a fun time in the industry.” He pointed out that overspending during the pandemic has finally begun to take its toll, with a significant peak in salaries and investments that has not been matched by revenue growth.
Furthermore, the global audience for video games has decreased since 2021, as new digital entertainment formats rise, including platforms like TikTok, sports betting, and consumer AI applications. Paul Fogolin, CEO of the Entertainment Software Association of Canada, noted that competition for consumer attention has intensified, leading to reduced willingness to spend as living costs climb. Additionally, the AI boom has increased the costs of essential components used in gaming consoles.
The situation has been exacerbated by diminishing financial support from provincial governments. In Quebec, a tax credit that provided companies with up to 37.5 percent of employee salaries was revised two years ago, significantly reducing its benefits. This abrupt modification negatively impacted lower-level jobs, often first affected during layoffs.
In the context of these challenges, generative AI introduces further uncertainties, though its contribution to job losses remains unclear. While just a tool to aid designers and streamline certain tasks, there are lingering questions about its long-term implications for employment in the industry.
Despite the prevailing difficulties, there are glimmers of optimism. Red Barrels has expanded its workforce to 90 employees in the past nine years and reported its best financial year to date, with sales nearing $40 million for the PC version of its latest game, “Outlast Trials.” Morin highlighted the importance of a cautious growth approach, stating that the studio would not hastily expand its workforce. The agility afforded by smaller game studios helps them adapt to shifts in the industry.
However, with this agility also comes vulnerabilities to the industry's fluctuations, as noted by Carmel Smyth, president of CWA Canada, who indicated that anxiety pervades the sector amidst ongoing changes.
