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Tuesday, April 23, 2024

Epic Games cutting 16% of staff, CEO says

Cary-based Epic Games, which operates the Fortnite franchise, is laying off about 16% of its workforce, according to a message from CEO Tim Sweeney released Thursday.

The cuts are expected to be as many as 900 positions. The company also said it would divest Bandcamp, which is joining Songtradr, a music marketplace company supporting artists. And its SuperAwesome advertising business will become an independent company under the SuperAwesome brand.

“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 to employees. “I had long been optimistic that we could power through this transition without layoffs, but in retrospect I see that this was unrealistic.”

Epic Games is offering six months’ severance and six months of health insurance. The company said it would also offer career transition services and 401(k) vesting to employees losing their jobs.

“Epic folks around the world have been making ongoing efforts to reduce costs, including moving to net zero hiring and cutting operating spend on things like marketing and events,” said Sweeney in the note. “But we still ended up far short of financial sustainability. We concluded that layoffs are the only way, and that doing them now and on this scale will stabilize our finances.”

Fortnite is an online game with more than 400 million users. Epic’s Unreal Engine technology is used to develop video games. Kids Web Services, the parent verification and consent management toolset, will remain part of Epic as part of the reorganization.

“While Fortnite is starting to grow again, 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,” Sweeney said in the email. “Success with the creator ecosystem is a great achievement, but it means a major structural change to our economics.”

Sweeney owns a majority of Epic Games shares, while China’s Tencent Holdings Ltd. has a 40% stake. The company was valued at more than $30 billion last year.

“We’re cutting costs without breaking development or our core lines of businesses so we can continue to focus on our ambitious plans,” said Sweeney. “About two-thirds of the layoffs were in teams outside of core development. Some of our products and initiatives will land on schedule, and some may not ship when planned because they are under-resourced for the time being. We’re OK with the schedule tradeoff if it means holding on to our ability to achieve our goals, get to the other side of profitability and become a leading metaverse company.”

Epic Games had plans to develop a new campus at the former Cary Towne Center shopping mall, but that strategy has been delayed. Epic Games bought the campus for $95 million in 2021 and initially said it would complete its move by 2024, Triangle Business Journal has reported.

 

David Mildenberg
David Mildenberg
David Mildenberg is editor of Business North Carolina. Reach him at dmildenberg@businessnc.com.

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