Comment Risk Management (Score 2) 76
During covid, there was massive overhiring to lock up talent, to make sure you had it when you needed it, because it was expensive to recruit and find people "just in time", and possibly (for some companies) to deny their competition access to labor. In the games industry, this took the form of acquiring smaller game studios - (many of whom now have had their projects cancelled and since been shuttered.)
With this whole AI thing, companies are now panicking that they have too many people on the bench if AI hits, so they're shedding headcount to conserve cash, which is now leading to too many people in a certain number of industries, chasing too few jobs. It's not just that they think they can produce more with fewer people - there's a potential threat from smaller competitors being able to outcompete them because the moat of needing hundreds of people to build a complex AAA title is potentially dissolving. (I would argue that the whole idea you needed to go for crazy high end graphics over gameplay is a wrong-headed expression of that need for a moat, but either way, you get the same result - worse return on investment than expected.)
What these companies aren't taking into account is... every one of these employees is now potentially capable of creating one of those small competitors to compete with their former employers (assuming you're in a state where non-competes are not unenforceable). I don't know if a successful crowdfunding of a game like Star Citizen can happen again, but the free/open source tools available to people with skills and experience using similar tools and workflows in their normal industry, plus the bonus of the (VC subsidized) AI tools means that we could start seeing better product from smaller game/vfx studios soon. Palworld was accused of using AI in their games creation, but was a success nonetheless, using a fairly small team (which scaled up.) Imagine a dozen companies like the team that made Palworld, starting small and scaling up as they gain traction.
I liken this (and now I'm showing my age) to the desktop publishing transition. People with no prior experience doing layout and design, taking a computer and a printer, and starting off with awful clipart, getting to the point where at a superficial level, they were competing with professionals who were trained in doing layout and design, and spent many years using specialized tools like optical typesetters, wax pasteup, letteraset transfers. However, the trained professionals, once they got a hold of the same tools, were able to really up their game, and a production shop of half a dozen people might have their jobs consolidated into a single workstation and a couple of people doing finishing.
You can look at this as glass half full for former employees who are willing to make the jump and start their own businesses, or glass half empty, because the people they've unleashed with the skills and experience that they have, aren't cheap labor to potentially rehire later, but potential competition for the same audience.