Adds details from analyst, background
March 24 (Reuters) - Epic Games will cut more than 1,000 jobs following a drop in engagement for "Fortnite", the latest layoffs in the video game industry where growth has stalled due to economic uncertainty.
The company also expects to save $500 million by reducing contracting and marketing spend and eliminating some open roles, CEO Tim Sweeney said in a note to employees on Tuesday.
"We're spending significantly more than we're making, and we have to make major cuts to keep the company funded," he said.
Blockbuster titles such as the first-person shooter game "Fortnite" had proven resilient after the pandemic, holding up as a slowdown eroded demand beyond the biggest franchises.
But engagement is now declining even for those, particularly live-service games that rely on a constant flow of costly new content to retain players.
"We've had challenges delivering consistent Fortnite magic," Sweeney said, adding "market conditions today are the most extreme" since the early days of the company founded in 1991.
"The layoffs aren't related to AI," Sweeney noted amid industry fears that the technology could replace developers.
Epic had earlier this month raised prices of Fortnite's in-game currency, citing higher costs to run the game.
The move marks Epic's second major round of layoffs in three years. In September 2023, the company cut about 830 jobs, or roughly 16% of its workforce, to boost profitability.
It was not immediately clear what percentage of staff would be impacted by Tuesday's announcement.
Last month, Fortnite topped U.S. monthly active players across PlayStation and Xbox, yet the average playtime fell sharply, according to Mat Piscatella, senior director at Circana.
Other gaming companies have also cut jobs.
In September, Electronic Arts EA.O laid off hundreds of workers and canceled a Titanfall game that was in development, according to media reports. Amazon's AMZN.O broader job cuts late last year also affected its gaming division.
Rising memory chip prices have added to the industry's difficulties, as surging demand from artificial intelligence data centers absorbs supply, pushing up semiconductor costs and forcing console makers to raise prices.
(Reporting by Aditya Soni and Kritika Lamba in Bengaluru; Editing by Tasim Zahid)
((Kritika.Lamba@thomsonreuters.com;))
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