Epic also announced some divestitures.

Earlier today, Tim Sweeney, the head of Epic Games, shared an email with the company’s employees, announcing some significant changes within the organization. In this message, Sweeney discussed the necessity of layoffs, divestitures, and the evolving landscape of Epic’s business model.

Epic Games, known for its popular game Fortnite, has been experiencing financial challenges. Sweeney candidly admitted that the company had been spending more money than it was earning. The significant investments in Fortnite as a metaverse-inspired ecosystem and supporting creator content no longer sustainable. While Fortnite’s growth was notable, it relied heavily on revenue sharing with creators, resulting in a lower profit margin compared to previous stages of the game’s success.

To address this financial imbalance, Epic had already taken steps to reduce costs, such as freezing hiring and cutting operating expenses. Unfortunately, these efforts fell short of achieving financial sustainability, leading to the difficult decision to lay off approximately 830, or 16%, of Epic’s employees.

In addition to layoffs, Epic Games announced divestitures. Bandcamp, a music platform, was being acquired by Songtradr, while SuperAwesome’s advertising business would become an independent company. The Kids Web Services (KWS) toolset would remain part of Epic.

Despite the tough decisions, Epic will support the affected employees with a severance package that includes six months of base pay and healthcare coverage. Stock option vesting schedules would be accelerated, and additional time would be granted for exercising stock options. Benefits like career transition services and visa support have also been offered where possible.

For those remaining at Epic, Sweeney emphasized the company’s strong prospects, highlighting its game experiences across various platforms and the success of Unreal Engine.

Sweeney addressed the impact on Epic’s priorities, reassuring that core businesses like Fortnite and Unreal Engine development would continue without disruption.

“We’re cutting costs without breaking development or our core lines of businesses so we can continue to focus on our ambitious plans,” wrote Sweeney. “About two-thirds of the layoffs were in teams outside of core development.”

The message also said Epic Games would continue its ongoing efforts in the legal battles with Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOGL) over distribution monopolies and taxes.

Related Story:  Sony And Lego Back Epic’s Metaverse Vision With $1B Each

Image by Gerd Altmann from Pixabay