You can't sleep. Thoughts that won’t go away and a sinking feeling about tomorrow keep you awake. Your hopes, your dreams, everything you’ve worked so hard for seems on the line, and you can't quite grasp why. The industry news doesn't help, with its constant reports of layoffs. It looks bleak.
If this resonates with you, take a moment to breathe and understand that the sun will rise tomorrow, regardless of our worst fears or greatest successes. How you think and cope during these times defines who moves on in one of the most brutal industries: video games. I've been there, having survived the economic crisis of 2009, making tough decisions with almost no visibility. It's daunting, but it's doable. The first step is to acknowledge that the only thing you can control is what you create with your own two hands and that the journey ahead is a long walk through hellish conditions.
This isn't financial or legal advice. I'm not a CPA or lawyer. I'm offering an informed opinion, and your mileage may vary. That being said, I've found this approach to be true and effective. Let's dive in.
WHAT'S HAPPENING
The industry is undergoing a reset driven by broader macroeconomic forces and the stimulus provided during COVID. The pandemic's endless liquidity created a distortion in growth due to increased consumer spending on games. This attracted speculative investments from external financial sources, spurring growth and inflating wages and talent demands. This growth was unsustainable, and the industry is now correcting itself, shedding jobs to return to a sustainable cycle. This doesn’t change the difficulty of job loss for those who are the backbone of this work, but it's an important part of understanding the realities of the video games business – a business that hinges on making money, harnessing passion, and satisfying consumers’ desire for entertainment.
IF YOU RUN A COMPANY
By now, you should have examined your finances and realized the situation is plateauing rather than improving. Focus on your core team, cutting back on luxuries and focusing on necessities. Depending on your organization's financial strength, surviving this storm means prioritizing essentials. You’ll face a series of trade-offs between bad and worse, but proactive decision-making is key.
Focus on how your business generates revenue and double down on that line. Reduce inefficiencies and burn rate. Be frank with your team about the company's status. They likely already sense it. Be direct, clear, and honest. This isn’t the time for insincerity when asking hard questions.
IF YOU WORK IN GAMES
Buckle up. Save. Cut back on non-essentials. Realize that longevity in this industry depends on capability, networking, and understanding the business. The more you grasp game development, publishing, and broader industrial economic realities, the more valuable you are to a company.
These cycles often lead to self-selection and tough circumstances. Working in games isn't guaranteed forever, but awareness and preparedness help you endure. Depending on where you work – and I hope it's a place that values honesty – you decide whether to endure the challenges or seek opportunities elsewhere. There's no shame in leaving the industry. The worst thing you can do is lie to yourself about what you can handle.
IF YOU INVEST IN GAMES
Congratulations, you've gambled with your money, hoping it multiplies before completely burning out. If you've been burned by this market's unpredictability, it's a lesson learned. It's time to reassess your portfolio companies, evaluating their viability based on their business acumen and resourcefulness.
Ensure that founders and CEOs understand more than just their product or the industry. They should be investing in developing their business understanding and frameworks. If you hear excuses like, “This is the games industry; that's not how it works,” particularly about discipline, process, and reporting, it's time to reevaluate your investment.
IF YOU HAVE INVESTORS
Congratulations on closing a round during a time of excessive exuberance. Now, you must do whatever it takes to avoid a down round. If you haven't already reviewed your situation as advised earlier, do it now. Be clear about your available cash and how you'll navigate through. You need to make money, and fast.
While cheap money might return, building a viable business in video games requires adept resource management, leadership, and some luck. Network with entrepreneurs who have built successful companies without venture capital. Review your pricing, product-market fit, and client satisfaction. Understand your unit economics and focus on earning from clients, not fundraising.
FINAL THOUGHTS
We're all interconnected in this industry. Understanding the wants and needs of different participants enables better decision-making and deal-making. The key lies in developing soft skills, curiosity, and a willingness to grind.
This might seem like an anomaly, but it's not. It's the cyclical nature of our industry, heavily influenced by macroeconomic realities and geopolitics.
Good luck out there and remember we live and play in a volatile, uncertain, complex, and ambiguous world, developing a high VUCA tolerance is essential.
