Gaming crisis: That’s why Japanese studios hardly lay off staff
Why are American game developers laying off tens of thousands of employees while companies in Japan remain extremely crisis-proof? A closer look at Western managers’ pay slips and exploding budgets provides the answer.
Crisis hits Western developers
While North American and European video game companies are currently experiencing a large wave of layoffs, the Japanese market remains largely stable. According to current forecasts, a total of almost 58,000 jobs in the industry could be cut worldwide between 2022 and the end of 2026. Epic Games CEO Tim Sweeney compares the current situation to the historic collapse of the video game industry in the 1980s.
Sharply increasing budgets for large productions and stagnating player numbers are forcing Western companies to take drastic cost-cutting measures. While a title cost a few million in the early 2000s, modern productions today often cost over 200 million euros. In Japan, however, a different picture emerges.
Why Japan is more resilient
According to that Knowledge Newsletter According to Edge magazine, companies such as Nintendo, Capcom and Konami have an employee retention rate of over 97 percent. If Japanese companies have to reduce their expenses, they are more likely to part with external service providers abroad. The primary goal is always to protect the core workforce in your own country and keep the knowledge within the company. Several factors contribute to the financial health of Asian studios.
This includes smaller and more efficient development teams without artificial growth. In addition, many companies are foregoing live service titles that are intended to generate permanent revenue. Another point is the focus on established brands instead of extremely expensive large-scale productions with hundreds of employees.
Executive level salaries in focus
There is also a big difference in the remuneration of managers. CEOs of Western publishers often receive over $30 million (around €26 million) per year. Their Japanese colleagues only earn a fraction of that. Nintendo President Shuntaro Furukawa’s salary was recently around 300 million yen (around two million euros). In contrast, the CEO of Electronic Arts receives a whopping $39 million (around €34 million).
Industry experts assume that the lower financial burden of manager salaries will help Japanese studios better absorb economic fluctuations. Instead of maximizing short-term profits for shareholders, companies focus on long-term stability. Companies like Koei Tecmo publicly emphasize that they continue to rely on smaller titles to remain successful in the long term. This protects them from the cycle of massive new hires and subsequent waves of layoffs.
Amit Gohar is Technical writer at ResearchSnipers.com, he is well versed Technology News writer, he has completed is MS computer Science in 2020. He can be reached at amit.g@researchsnipers.com
