Bungie Layoffs Highlight Post-M&A Issues for Gaming Industry as Its Unions React

The latest company to experience layoffs is feeling that pain in a particularly intense year for the gaming industry.

Bungie CEO Pete Parsons on Wednesday revealed a restructuring plan that would eliminate 220 roles, integrate 155 positions into other parts of the Sony Interactive Entertainment business and form a new studio of close to 40 people under PlayStation, reportedly. He summarized “rising costs of development and industry shifts” and “enduring economic conditions” as the reason.

This follows an earlier round of layoffs last November that saw Bungie cut around 100 jobs, which preceded 2024’s cascade of more than 11,000 layoffs across the gaming sector — an amount that outpaced last year’s cuts in more than double the time.

The original developers of the first “Halo” games for Microsoft’s Xbox consoles, Bungie has a complex history of operating both independently and under large corporations. After going independent from Microsoft in 2007, Bungie eventually moved on from “Halo” to “Destiny,” a live-service franchise that was published exclusively by Activision until Bungie acquired the publishing rights in 2019.

Then in January 2022, Microsoft and Sony announced deals to acquire Activision Blizzard and Bungie, respectively.

The deals differed immensely in size, but each was driven by a desire to strengthen live-service strategy at either console giant through lucrative microtransactions, as well as bringing in expertise to, in Bungie’s case, advise on live-service projects at other studios.

Alongside its continuing work on expansions for “Destiny,” Bungie had several other projects in various stages of development that were of interest to PlayStation, but such rapid expansion amid industry-wide slowdowns in capital investment, lower ad spend and diminished release slates this year has made it difficult for even the biggest live-service brands to sustain themselves.

As popular as “Destiny” is, it’s not part of the big five online games that rake in billions of dollars each year, some of which operate as multimedia platforms unto themselves: “Roblox,” “Fortnite,” “Minecraft,” “Call of Duty” and “Grand Theft Auto.”

Furthermore, the corporations presiding over such brands are among the biggest contributors to layoffs over the last year, particularly after pricey acquisitions. Take-Two Interactive’s $12.7 billion acquisition of mobile giant Zynga was meant to flush the company with more in-game spending to support “Grand Theft Auto 6” and other big projects, but the company cut 600 roles as recently as April, its third round of layoffs in the span of the year.

After that, the company wrote down nearly $3 billion in losses for the first quarter of 2024 that were mostly related to “goodwill” expenses incurred from its M&A strategy.

Microsoft Gaming’s post-M&A reality has been even messier. “Minecraft” was already part of its first-party portfolio before the Activision deal, but the latter brought No. 1 console franchise “Call of Duty” into the fold. The earnings difference is notable; in its latest financial quarter, Microsoft attributed 58 points of a 61% increase in Xbox content and services revenue to the net impact of acquiring Activision.

Yet mere months after that $69 billion deal closed, Microsoft cut 1,900 roles, most of which were across Activision’s three publishers, including Blizzard and King. Later in May, its earlier acquisition ZeniMax faced layoffs as well, including full studio closures at publisher Bethesda.

As much as corporations justify cost-cutting as a practical solution to survive market hurdles, pronounced responses from their labor forces become inevitable.

In July, “Starfield” developer Bethesda Game Studios formed a “wall-to-wall" union that encompassed all roles at the studio, taking a cue from QA testers at ZeniMax who unionized in 2023. Days later, Blizzard saw more than 500 employees who work in various capacities on online game “World of Warcraft” unionize, becoming the largest such union at Microsoft Gaming, which inherited the union for “Call of Duty” studio Raven Software when the Activision Blizzard deal closed. The newest unions formed with the assistance of the Communication Workers of America.

Hollywood’s side of the labor force has also joined the action. SAG-AFTRA, which participated in a dual strike with the WGA last year against the AMPTP and represents many actors who contribute their voices and likenesses to games, declared a walkout against major video game publishers in late July.

Like the Hollywood strikes, companies using AI as potential shortcuts to paying voice actors is a major point of concern, as are contracts that seek to retain an actor’s likeness in perpetuity for games.

SAG-AFTRA members picketed outside the Warner Bros. lot Thursday in Burbank, where Warner Bros. Games is located. “Suicide Squad: Kill the Justice League,” a big WB Games release in February that was heavily criticized for its live-service elements, was a financial disaster to which Warner Bros. Discovery CFO Gunnar Wiedenfels attributed a $200 million loss in the gaming division.

The “Suicide Squad” game was made by Rocksteady, a studio otherwise known for its acclaimed, single-player “Batman: Arkham” games. Similarly, the Arkane Austin studio that Microsoft Gaming closed as part of the Bethesda layoffs was responsible for live-service failure “Redfall,” the first game of that sort at Arkane’s studios after making well-received games such as “Dishonored.”

For as much as the global video games industry is worth — analytics firms typically pin it at around $200 billion — the disconnect between the corporations running the show and its revolving door of a labor force finding job security in short supply continues to undermine the industry’s efforts to get back on solid footing as AAA costs soar.

“Grand Theft Auto 6,” which is targeting a fall 2025 release after more than a decade spent in development and a rumored $2 billion budget, will undoubtedly see sales surge at Take-Two Interactive.

But as multiple Microsoft studios have shown in recent weeks, the developers making such a mammoth game might have something to say about it — and their colleagues cut from the team.