👾 "Year of Efficiency" for Gaming Studios Means Ubisoft is in Trouble!
PLUS: Using AI for game development content and game design
Welcome, game people.
Top discussions in gaming seem to still be around AI services and the potential impact of AI to game development.
Hey, what about using AI for game dev content?
Well, folks, I will try it in this week’s newsletter.
Today, I will cover one topic recently discussed in private game dev circles instead of writing about multiple news topics. However, I’m going to X that with AI. We will use Google Bard as a partner in developing the content I’ll discuss today and then compare some of the analysis to a trusted data source; in our case, we’ll compare against Bloomberg data to see how good AI is.
Here’s what’s shakin’ in the world of F2P game dev this week:
The “Year of Efficiency” for game studios, and does this mean Ubisoft is in big trouble?
Can Ubisoft Survive In an “Age of Efficiency”?
The world is changing. Again.
We’ve lived in a world of excess with zero interest rates, massive government stimulus, and high growth based on excess. Times have changed.
Mark Zuckerberg recently talked about how Meta needs to change. It needs to reorient towards efficiency:
“dramatically increase developer productivity and tooling, optimize distributed work, garbage collect unnecessary processes, and more.”
“over the next couple of months, org leaders will announce restructuring plans focused on flattening our orgs, canceling lower priority projects, and reducing our hiring rates.”
“As I’ve talked about efficiency this year, I’ve said that part of our work will involve removing jobs — and that will be in service of both building a leaner, more technical company and improving our business performance to enable our long term vision.”
Zuck has been turning the ship around in the face of big missteps during the “Age of Excess.” In November, the company laid off more than 11,000 employees; in April, 3,000 additional employee layoffs were announced, and just last month, the company announced plans to cut 10,000 employees.
Meta grew carelessly and inefficiently, allowed massive management stacking (growing middle management layers), and mismanaged resources by focusing on dreams of a phantom VR Metaverse and caving to every employee demand.
This isn’t just Meta. It’s nearly every Silicon Valley company, including Google, Microsoft, and others.
Those days may be over at many companies for the foreseeable future.
Over the last three months, we’ve seen high-profile layoffs in tech, including Amazon, Twitter, Spotify, Netflix, Redfin, Noom, Gopuff, ThredUp, Carvana, and Robinhood. More layoffs are coming.
Welcome to the Age of Efficiency.
The gaming industry is subject to the same macroeconomic forces and excess that have driven the rest of the global economy.
In the games industry, layoffs have come, and more are coming:
Ok, I’m going to be honest here. Don’t hate me, but this post was initially inspired by several talks I’ve had with many of my game development friends in LA. Ubisoft was a common target of quite a lot of vitriol when it came to the quality and efficiency of their employees.
I don’t know many Ubi folks, and don’t shoot the messenger. However, there was a lot of talk about Ubisoft’s culture and performance as the least efficient major AAA games studio. According to my friend, this is quantifiable; he advised that I look at the bookings per employee of major game studios compared to Ubisoft: they are the worst.
Is that true? Hey Google Bard, let’s find out…
Trying to get bookings data from Bard was super error-prone, so I went with “public and private game studios that have over $100M in revenue.”
Below is largely the output, although I had to fix some obvious problems in a few companies' numbers of employees and revenue. I further deleted a few others that were obviously wrong.
Major Private and Public Companies (>$100M Revenue) by Revenue per Employee (Some companies deleted with clearly inaccurate data):
If this data is correct (I’m pretty sure there are likely more errors from Bard above), it shows what many of my friends have suggested regarding Ubisoft. The analysis isn’t perfect, but it shows directionally that companies with very low revenue per employee likely operate very inefficiently.
Expect those studios at the top of the list to be some of the first to experience big shifts - like Meta - if they want to survive in this new world.
Ok, now let’s use much better data. Here’s data from Bloomberg of trailing twelve months’ revenue (for companies with > $100M in revenue) and only including companies where Bloomberg had the number of employees data. I also removed a lot of Chinese companies and conglomerates (not all, SEA is there), but here’s a much better and likely much more accurate list below:
In both data sets, Ubisoft is clearly in trouble.
Although I’m a bit neutral on Social Capital founder Chamath Palihapitiya, he had several really strong points in his annual letter:
As we enter a sustained period of non-zero interest rates, discipline of mission must now also intersect with discipline of management and operation. Efficiency, risk management, business model fundamentals, and most importantly, sustained profitability, are must-haves – not nice-to-haves.
Over time, this heightened level of focus and discipline will lead to better run and more efficiently managed businesses. Companies won’t be able to overpay for underperforming talent or underpay overperforming talent. They won’t hand out the proverbial “free lunch” or other benefits that aren’t indexed to profitability. Middle managers will be under pressure to do more actual work and less coordination. This process will be painful, but the end result will be worth it.
The “age of excess” is over. If Meta, at its scale, can make a dramatic change, so can Ubisoft with the right leadership.
Let’s wish them the best of luck, as change is coming.
Age of Excess tweet (Brad Gerstner)
Update on Meta’s Year of Efficiency (Facebook Blog)
Meta to lay off 10,000 more workers after initial cuts in November (CNBC)
EA will lay off 6% of its staff to drive greater focus in uncertain economy (GamesBeat)
2022 Annual Letter (Social Capital)
Using AI For Game Design?
Messing around more with ChatGPT and Google Bard, I wondered how useful these AI services could be for other game development applications.
We’re currently developing weapon stats for our shooter game at Lila. Can these AI services do some game design?
Google Bard (has access to live data):
Not bad. Not quite what we are going to use, but not entirely not useful.
The latest Economist cites Omdia and Newzoo data in forecasting that Gaming will become the #1 consumer spending category for entertainment to exceed $200M and surpass Pay-TV by 2026. Even further, they estimate video game players to have exceeded 3 billion in 2022:
Great insights on the market Joseph! Regarding the AI for design, my understanding on that is, it's a great tool to have if you know your stuff. It takes a good mind to extract a good output from those AI because a lot of the times along with the desired output we also get a lot of non relevant info which can get difficult to filter