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‘Fortnite,’ Unreal Engine Studio Epic Games to Layoff 830

Announced by CEO Jim Sweeney on Thursday, the company plans a 16% workforce reduction as well as a divestiture of Bandcamp in a move towards a new ‘metaverse-inspired ecosystem’ strategy.

Epic Games, the studio behind Unreal Engine and Fortnite, will soon lay off around 830 employees, roughly 16% of its workforce, in a move towards a new business strategy described as a “metaverse-inspired ecosystem for creators.” Most of the roles eliminated will be in teams outside core development.  Epic will also divest the audio distribution platform Bandcamp to Songtradr, while the studio’s SuperAwsome advertising business will become its own company under its original founders.

In an email sent early Thursday, CEO Tim Sweeney explained the layoff plan to workers.

“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.”

“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,” Sweeney added. “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.”

Epic will not cut any core businesses and will continue to invest in games with Fortnite first-party development, the Fortnite creator ecosystem and economy, Rocket League and Fall Guys; and services for developers including Unreal Engine for games and enterprise, Epic Games Store, Epic Games Publishing, Epic Online Services, Kids Web Services, MetaHuman, Twin Motion, Quixel Mega Scans, Capturing Reality, ArtStation, Sketchfab and Fab.

A company meeting will be held in October to outline details and priorities of the shift. There are no more planned layoffs, and Epic will continue to hire for critical roles.

Read Sweeney’s email in its entirety below:

Hi everyone,

As we shared earlier, we are laying off around 16% of Epic employees. We're divesting Bandcamp and spinning off most of SuperAwesome.

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. 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, 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.

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. 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.

We're also making some divestitures. Bandcamp is joining Songtradr, a music marketplace company supporting artists. SuperAwesome’s advertising business will become an independent company under the SuperAwesome brand, led by their current CEO Kate O’Loughlin. Kids Web Services (KWS), the parent verification and consent management toolset, will remain part of Epic. 

Saying goodbye to people who have helped build Epic is a terrible experience for all. The consolation is that we're adequately funded to support laid off employees: we’re offering a severance package that includes six months base pay and in the US/Canada/Brazil six months of Epic-paid healthcare. We’re offering to accelerate people’s stock option vesting schedule through the end of 2024 and are giving two additional years from today to exercise the options. In the US we’re also offering to vest any unearned profit sharing from their 401k. And we’ll provide benefits including career transition services and visa support where we can.

For those still at Epic, you’ll hear more from senior leaders about the path forward for your team. Epic’s prospects for the future are strong. We have amazing game experiences across multiple platforms. We’ve built the best engine in the world, and will be hosting Unreal Fest next week to bring the community together and spotlight the things they are building with Unreal Engine and UEFN. Creators are making a living building for the Fortnite ecosystem, with time in third-party games now exceeding first-party. 

We're cutting costs without breaking development or our core lines of businesses so we can continue to focus on our ambitious plans. 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. 

-Tim

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Journalist, antique shop owner, aspiring gemologist—Laurén brings a diverse perspective to animation, where every frame reflects her varied passions.