Is the Video Game Industry Crashing? Mass Layoffs, PS5 Price Hikes, and the GenAI Threat

In a time where we are seeing mass layoffs and studio closures plaguing the gaming industry, Brenda and John Romero, founders of the Irish studio Romero Games, most well known for the Doom game that helped kickstart the first-person shooter genre, recently did an interview with GamesIndustry.biz.¹ In the interview, the couple were reflecting on a rough year for their studio, facing a sudden funding rug pull which led to them having to downsize significantly.² 

Beyond speaking on their own hardships, the couple made some interesting comments regarding the state of the gaming industry, claiming it is similar to the US video game crash of 1983: “I feel like the industry’s in a really horrible place… I mean, we were there in the 80s for the crash, and this is definitely crashier. There are so few people that have not been affected, or their partner’s affected, or they’re worried about being affected. It’s a really difficult time right now“.³ They cited the example of Battlefield 6, which did very well, and yet EA still made layoffs in the studios behind it.⁴ 

One of the reasons Brenda speculates has led to this crisis is the rise of generative AI (GenAI): “This is really one of those times where I don’t know. And you hear behind the scenes, there’s tremendous push toward teams using generative AI, there’s tremendous pushback from teams and from gamers about using generative AI…”.⁵

Studios working in the AA sector are in most danger, claims the couple, as many publishers are now preferring to develop smaller titles with budgets of less than USD 1 Million, which cannot compete with the larger counterparts who are developing games using huge budgets.⁶ Moreover, studios are increasingly working with micro teams, leading to layoffs all across the industry.⁷

Although the comments made in the interview may seem farfetched to some, we are currently seeing an epidemic of layoffs, closures, and price hikes in the industry that are quite simply impossible to ignore. 

How Geopolitical Tensions and Automation are Gutting Game Development

Just in the last few weeks we have been seeing multiple studios announcing significant layoffs. Eidos-Montréal, developer of Marvel’s Guardians of the Galaxy, has announced a layoff of 124 employees, including Studio head David Anfossi, due to “changing project needs and impacts across production and support teams”.⁸ This is already the second time the studio has announced layoffs in the last 4 months.⁹

Pixelberry Studios, the developer of titles such as the popular Choices mobile game, has also allegedly laid off staff, although the studio has not yet made any public statements, and it is unclear how many staff have been impacted.¹⁰ Nevertheless, a few former employees have announced on LinkedIn that “another layoff hit Choices”.¹¹

Relating to Brenda Romero’s critique of GenAI, a former Warhorse Studios translator, Max H., has claimed in a Reddit post that he has been “fired and replaced with AI”.¹² Max alleges that he was told in a meeting that “in an effort to ‘make the company more effective’ and ‘save finances,” his position was to be made “‘obsolete’ in favor of using AI for all translations going forward“.¹³

Beyond speaking about his layoff experience, Max also commented about the growing use of GenAI in the games industry, saying: “I want you to know that the growing use of AI greatly affects people in the games industry and many others, and I thought you should know how much the company that makes the games you love value the work of their employees, not to mention the environment”.¹⁴

Not only game studios are affected, but also tech Giant Meta had recently reported a cut of approximately 700 roles across a few divisions, including its Reality Labs unit.¹⁵ These layoffs come after an earlier cut this year of approximately 10% of Meta’s Reality Labs workforce, which led to the closure of three VR studios.¹⁶ These cuts come after the Reality Labs division generated a reported USD 19.2 Billion loss in revenue.¹⁷

Epic Games have also been in the news a lot recently, after announcing a layoff of more than 1000 employees, due to a “downturn in Fortnite engagement that started in 2025,” which led to the company spending more cash than it’s bringing in”.¹⁸ In addition to the layoffs, Epic announced a price increase for its in-game current, V-Bucks, claiming: “The cost of running Fortnite has gone up a lot”. ¹⁹

These layoffs also signal that players are overall less engaged in the gaming market. Even Fortnite, a title that was said to be a ‘forever game’, is facing significant difficulties, with player hours dropping almost 30% from 2024: “The situation for the game, which once appeared to be completely gravity-defying, has seemingly become heavy enough that Epic feels compelled to act to ensure that it remains commercially viable”.²⁰

Commenting on the Epic Games layoffs, Ampere Analysis research director Piers Harding-Rolls believes that all companies are impacted by rising costs, especially due to the US and Israel war with Iran, stating: “It tells us that all companies, whatever size or success, are in a battle to manage their costs… This will not get any easier with another round of global inflation expected due to the U.S. and Israel war with Iran“.²¹

The war has also seemed to have an impact on the console industry, with Sony announcing significant price increases for its PS5 consoles.²² One of the main reasons cited behind this price hike is “a global chip shortage driven by the AI industry and ongoing geopolitical tensions… pushing up production costs across consumer electronics”.²³ It was explained that Iran’s attack on Qatar’s natural gas export facility heavily disrupted helium, which Qatar accounts for a third of the world’s supply.²⁴ This is crucial because helium is critical in semiconductor manufacturing.²⁵ The rise in console prices was even cited by Epic games as one of the reasons for their layoffs.²⁶

Takeaways

With this epidemic of layoffs and rise of console prices, which are making gaming less accessible to consumers, and thus further lowering demand for games, thereby exacerbating the layoff problems, it is clearer to see what Brenda Romero meant when she suggested a crash in the industry is imminent. 

This crisis also mirrors the concerns expressed in the GDC 2026 State of the Game Industry Report, where over half of respondents expressed a negative or neutral expectation for whether they anticipate layoffs at their company in the next year,²⁷ and 52% of respondents saying they felt GenAI had a negative impact on the game industry.²⁸

The author believes that in order to survive this imminent crash, the gaming industry must pivot from its obsession with infinite growth and profit maximisation toward a model of sustainability at all costs. The industry needs to start appreciating human-led creativity more and stop the pursuit of Generative AI for profit purposes. If the industry continues to treat its developers as ‘obsolete’, it may face a permanent loss of talent and trust. The industry’s recovery requires a return to valuing the people who make the games as much as the technology that powers them.

1.  James Batchelor, ‘”We were there in the ’80s for the crash, and this is definitely crashier”: John and Brenda Romero reflect on the industry crisis’ (GamesIndustry.biz, 26 March 2026) https://www.gamesindustry.biz/we-were-there-in-the-80s-for-the-crash-and-this-is-definitely-crashier-john-and-brenda-romero-reflect-on-the-industry-crisis accessed 31 March 2026.
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2.  ibid.
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3.  ibid.
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4.  ibid.
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5.  ibid.
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6.  ibid.
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7.  ibid.
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8.  Sophie McEvoy, ‘Eidos Montreal announces 124 job cuts; studio head David Anfossi departs after 19 years at developer’ (GamesIndustry.biz, 31 March 2026) https://www.gamesindustry.biz/eidos-montreal-announces-124-job-cuts-studio-head-david-anfossi-departs-after-19-years-at-developer accessed 31 March 2026.
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9.  ibid.
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10.  Vikki Blake, ‘Choices developer Pixelberry Studios lays off staff’ (GamesIndustry.biz, 30 March 2026) https://www.gamesindustry.biz/choices-developer-pixelberry-studios-lays-off-staff accessed 1 April 2026.
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11.  ibid.
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12.  Vikki Blake, ‘Kingdom Come: Deliverance 2 studio allegedly fires “obsolete” translator to replace them with AI’ (GamesIndustry.biz, 30 March 2026) https://www.gamesindustry.biz/kingdom-come-deliverance-2-studio-allegedly-fires-obsolete-translator-to-replace-them-with-ai accessed 1 April 2026.
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13.  ibid.
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14.  ibid.
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15.  Sophie McEvoy, ‘Meta reportedly lays off around 700 workers, Reality Labs division affected’ (GamesIndustry.biz, 27 March 2026) https://www.gamesindustry.biz/meta-reportedly-lays-off-around-700-workers-reality-labs-division-affected accessed 1 April 2026.
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16.  ibid.
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17.  ibid.
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18.  Nicole Carpenter, ‘Analyst says Epic Games layoffs send a clear signal: “This will not get any easier”’ (Game Developer, 26 March 2026) https://www.gamedeveloper.com/business/analyst-says-epic-games-layoffs-send-a-clear-signal-this-will-not-get-any-easier- accessed 31 March 2026.
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19.  ibid.
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20.  Rob Fahey, ‘It turns out Fortnite isn’t the forever game after all | Opinion’ (GamesIndustry.biz, 27 March 2026) https://www.gamesindustry.biz/it-turns-out-fortnite-isnt-the-forever-game-after-all-opinion accessed 1 April 2026.
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21.  Nicole Carpenter, (n 18).
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22.  Annie Sharma, ‘Why Is PS5 Getting More Expensive? War And AI Have A Lot To Do With It’ (ABP Live, 31 March 2026) https://news.abplive.com/gaming/playstation-5-price-hike-why-ai-industry-chip-shortage-impacts-gaming-consoles-1833857 accessed 1 April 2026.
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23.  ibid.
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24.  ibid.
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25.  ibid.
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26.  ibid.
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27.  GDC survey reveals layoffs up 6%, 36% of industry using AI, and overwhelming support for unionisation in the US, GamesIndustry.biz (website post, 2026) https://bit.ly/4rmq1K6 accessed 1 April 2026.
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28.  GamingOnLinux, GDC 2026 report – 36% of devs use generative AI, while 28% target Steam Deck and 8% Linux (online, 30 January 2026) https://www.gamingonlinux.com/2026/01/gdc-2026-report-36pct-of-devs-use-genai-28pct-target-steam-deck-and-8pct-target-linux/ accessed 1 April 2026.
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