Epic Games has cut more than 1,000 jobs in response to a "downturn in Fortnite engagement"

Epic Games is reducing its workforce by over 1,000 employees due to a decline in engagement with Fortnite, necessitating greater expenditures than its income.

In a message to employees, CEO Tim Sweeney stated that Epic must "implement substantial reductions to secure the company's financial future."

"These layoffs, alongside over $500 million saved through cuts in contracting, marketing, and the elimination of some vacant positions, place us in a steadier financial position."

Sweeney clarified that the layoffs were not linked to AI advancements, expressing a desire to maintain a strong team of developers to create excellent content and technology.

He cited industry problems like decelerating growth, diminished spending by consumers, increased costs, and current consoles underperforming compared to previous generations as factors in the decision.

Discussing the market, Sweeney said current challenges are unparalleled since the industry's inception, presenting a significant shake-up but also vast prospects for those companies that emerge successfully.

He expressed regret over losing talented staff, emphasizing that Epic employs some of the best in the industry. Employees affected by the layoffs will receive a severance that includes a minimum of four months' base pay, with additional compensation based on their tenure, and continued healthcare coverage paid by Epic.

In the United States, healthcare coverage will be extended for six months. Stock options will be accelerated until January 2027, with equity options to be exercised up to two years later.

A company meeting is scheduled for Thursday to discuss the future business strategy in detail.

Epic previously enacted major layoffs in September 2023, letting go of more than 800 employees, about 16% of its workforce, primarily affecting teams outside core development areas.

During that period, the company aimed for net-zero hiring and reduced spending in marketing and events, but still fell short of becoming financially sustainable.

The layoffs also impacted Mediatonic, known for developing Fall Guys, along with 250 employees from the sale of the music platform Bandcamp.

Last week, Epic disclosed plans to raise prices on in-game currency to manage increasing operational costs for Fortnite.