'Fortnite' Creator Epic Games Freezes Hiring Amid New Cost Cutting Initiative

“Fortnite” developer Epic Games is freezing hiring, reassigning employees and exploring other ways to lower its operating costs in one of the first cost-saving initiatives in the company’s modern history, according to an email sent to staff by senior leadership on Thursday and obtained by The Jacob Wolf Report. 

The company is scaling back its efforts across many projects and shifting its priorities to “must-succeed initiatives” for 2023. According to the email, sent by Epic Games COO Daniel Vogel, the company will move some staff and teams over to one of five projects: the Unreal Editor for Fortnite, its metaverse collaboration with LEGO, Fortnite Chapter 5, Harmonix Festival and Rocket League Racing. 

It is also moving to “net-zero hiring.” That means the company will not automatically backfill roles as employees leave, but will go through an intensive review of whether there’s a critical need in those positions. The company is looking to stay as-is and not increase its headcount moving forward.

It is in the process of completing a final hiring phase of about 100 jobs prior to the freeze, roughly 35 in the LEGO project, 24 for currently offered roles, 10 more roles that Vogel labeled “critical” and 26 instances where it is converting an intern to a regular employee. All other jobs listed on Epic Games’ recruiting websites will be eliminated. 

“We’re not laying anyone off,” Epic’s director of corporate communications Elka Looks told The Jacob Wolf Report on Friday. “We have ambitious plans to invest through the downturn and these cost control measures reinforce our plans.

In his email, Vogel also mentioned the company is looking at ways to “save money” — be it outsourcing, reducing hosting costs, lower spend on user acquisition, reducing its office spend or using automation to streamline customer service. He called for additional ideas from leadership at the company. 

Vogel did not mention layoffs explicitly in the email, but there is a growing concern at the company after that email went out Thursday morning, according to several sources employed at Epic. 

The Jacob Wolf Report is a reader-supported venture. Free

and paid versions are available. The best way to support us here is by taking out a paid subscription.

Epic has an almost perfect track record of avoiding overgrowth and having to course correct with layoffs. But until 2017, the company had not experienced nearly as much success as when “Fortnite” became the most culturally-relevant video game in the world. 

Vogel’s email seems to signal a cash crunch at the company as it evaluates its future where the public markets are weak—eliminating a solid opportunity to go public—and late-stage venture capital has dried up. 

Epic previously raised $3 billion across two funding rounds in 2021 and 2022, following the success of “Fortnite.”  Investors in those rounds include PlayStation maker Sony and Kirkbi, the ownership group behind LEGO. 

With the explosion of “Fortnite” in 2018, Epic became one of the most successful game studios in the world. “Fortnite” earned Epic more than $15 billion in revenue from 2018 to 2021, according to financial disclosures made in the company’s legal battle against Apple in 2021. “Fortnite” accounted for 97% of the company’s revenue in 2018 and 88% in 2019.

That success led the company to expand to a much broader portfolio, including the launch of Epic Games Store, a PC gaming marketplace and competitor to Steam. Prior to “Fortnite,” the company was best known as the developer behind the widely-used, industry-standard Unreal Engine. But following its 2018 success, it also began publishing other titles and acquired “Rocket League” developer Psyonix, “Fall Guys” developer Mediatonic and Harmonix, best known as the original developers of “Rock Band” and the “Guitar Hero” series. The company is reportedly valued at $32 billion.

In 2020, the company began a campaign against Apple and Google to push back against the iOS App Store and Android Google Play stores’ take rates from publishers. Both stores take a top-line cut of 30% of all transactions, much to the dismay of many developers. 

After instituting a hot fix that circumvented Apple and Google’s payment processors in the “Fortnite” game on iOS and Android in August 2020, both marketplaces banned the app from the store. Epic then filed suit against both, with the Apple case becoming a hallmark, must-watch antitrust case that proceeded in May 2021. Epic received support from the likes of Spotify, Tinder and Hinge parent company Match Group, as well as many others. 

The ruling in the Epic Games v. Apple case was that while Apple’s policies weren’t inherently anticompetitive, the San Francisco-based federal court forbade Apple from punishing developers for notifying users of other payment methods outside of the iOS app. Many developers tack on a surcharge to offset Apple’s cut of revenues. 

With economic uncertainty ahead and signs of what might be an impending recession, gaming as a whole has begun to feel contractions on spending. 

Electronic Arts announced on Wednesday that it is laying off 6% of its workforce, around 800 jobs. In a broader layoff of 10,000 employees in January, Microsoft let go of some of its team members at 343 Industries, the developers of “Halo,” and Bethesda Softworks, creators of “Fallout” and “The Elder Scrolls.” The group behind “League of Legends” and “VALORANT” Riot Games also eliminated 40 jobs in January. 

Thank you for reading The Jacob Wolf Report. This post is public so feel free to share it.