I read somewhere that the studio behind Star Wars: Zero Company furloughed part of their staff because they ran out of money. They are hoping that with the money from sales they can get the people back. Is this something that happens often in the game industry?
I was part of an employee furlough early in my career. The studio ran out of money. “Furlough” sounds better than “laid off” – the difference is that we were technically still “employed” if the studio could ever get some money to pay us to come back, but for all practical purposes it was the same – most of us aren’t in a situation where we could go for an indefinite period without income, so we all started looking for new jobs.
Here’s the thing – every company, from the biggest to the smallest, does these kind of calculations. They have their total income (revenue, interest on investments, etc.) and their burn rate (money they must spend per month to keep everything running – salaries, rent, utilities, taxes, licensing, insurance, interest on debts, etc.). If the burn rate is greater than the income, then the company is living on a limited time and has a specific runway – that’s current cash stockpile divided by the difference between income and burn rate. The amount of runway a company has tells you how much time the company has before they must shut down.
Furloughs and layoffs happen to reduce burn rate, typically to get a longer runway for the company in hopes it can survive. Every studio wants to survive and continue to make games, but we have to deal with economic realities – employees must be paid and the money must come from somewhere. When any studio suffers economic hardship, they must often make the hard choice to reduce their burn rate in hopes of surviving to grow another day. Some manage to pull themselves back to profitability or survive in some other way (like being acquired by another company). In the situations they are unable to do so, the studio closes permanently.
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