Epic Games is laying off 16 percent of its workforce and selling Bandcamp

Fortnite maker Epic Games is laying off 16 percent of its staff — or about 830 employees. CEO Tim Sweeney said in an open letter to sent employees that Epic Games has been spending “way more money” than it earns. “We concluded that layoffs are the only way," he wrote "and that doing them now and on this scale will stabilize our finances.”

For those impacted by the layoffs, the company says it will offer a severance package that includes six months base pay and healthcare. Epic Games is also offering to accelerate employee’s stock option vesting schedule through 2024, while giving two additional years to exercise the options. About two-thirds of the layoffs affected teams outside of core development.

Sweeney wrote that Epic had been making an effort to reduce costs by not only freezing hiring but also by cutting spending on things like marketing and events. And while the metaverse is still in a conceptual phase, Sweeney said he wants the company to focus on developing infrastructure for its games to exist in the metaverse ecosystem. For example, Epic teamed up with LEGO to build an “immersive digital experience” for kids.

Epic also said it is divesting Bandcamp, an online music platform it acquired in mid-2022; it's coordinating a sale to Songtradr, a music licensing platform. SuperAwesome, a kid-friendly developer Epic acquired back in 2020, is being broken apart and partially spun out as well. Its advertising business will become an independent company, while the Kids Web Services segment and the parent verification and consent management toolsets will remain part of Epic.

While these moves to cut spending may help Epic Games stave off pressure from investors like Tencent and Sony, its flagship game Fortnite remains banned from Apple’s App Store and Google’s Play Store, which will continue to impact its bottom line. Not to mention the $520 million dollars in penalties it has incurred from the FTC and its efforts to have the Supreme Court overturn a ruling that cleared of antitrust violations.

Still, Sweeney says Epic's "prospects for the future are strong," thanks to Fortnite and the Unreal Engine. Next week, the company will be hosting Unreal Fest, and while some products and initiatives will continue to land on schedule, Sweeney says some may fall behind due to restrictions on resources. “We’re ok with the schedule tradeoff if it means holding on to our ability to achieve our goals, get to the other side of profitability and become a leading metaverse company,” he said in the memo.

The company says it will not cut any funding for its core businesses and it will continue to invest in games with Fortnite first-party development, as well as the Fortnite creator ecosystem.