Following the latest reports of layoffs and studio closures happening around the world, there’s been some discussion among Japanese game developers about how industry-wide issues like rising production costs are affecting the domestic scene. While Japan hasn’t seen on-the-spot, mass layoffs happen like the US has, industry professionals seem largely in agreement that this is mostly thanks to labor laws making employee terminations very difficult. On the other hand, downsizing has still been happening, just in “invisible ways.”
The topic was prompted by Sega and Mixi game producer Taira Nakamura, who recently commented on his X account, “One reason Japanese companies appear to have fewer instances of layoffs despite facing comparable pressure when it comes to costs is likely due to Japan’s employment regulations. However, the inability to easily dismiss staff is creating a shift towards a policy of not hiring in the first place.”
Nakamura goes on to explain that this involves reduced recruitment quotas for new graduates, as well as the door for mid-career hires narrowing. He predicts that creatives will find it increasingly difficult to join Japanecse game companies going forward. Coincidentally, a recent survey of around 40 domestic game companies showed that only about 1.9% of aspiring game dev applicants in Japan manage to get hired.
It appears reductions are also affecting outsourcing development studios much more than major game companies. In response to Nakamura, Amata Games CEO Hiromichi Takahashi commented, “While no overt layoffs have been announced within Japan’s gaming industry, many major game companies have significantly reduced the lines of work outsourced to external developers over the past two years or so. Consequently, developers continue to face considerable hardship. Japan too is experiencing reductions in developer numbers, just in a less visible manner.”
This seems to be creating a rift between major and small developers, as former Game Studio Inc. creator Kaku Okuda explains, “The gaming industry has become incredibly polarized, split into a tiny handful of established, hugely successful content and everything else. There’s almost no middle ground. (…) Titles that were previously considered mid-tier in scale have likely seen their development and promotional costs skyrocket compared to before. This is due to the demand for quality exploding, coupled with work-style reforms making it impossible to overburden staff, leading to inflated development costs. The expense of ensuring titles don’t get buried in the market has also risen.”
It’s also worth mentioning that aside from these examples, Japan’s mobile game industry has seen pretty overt workforce reductions in the form of companies soliciting “voluntary retirements” and offering buyouts. Just last month, Dragon Quest Walk developer COLOPL announced that it had let go off 104 full-time employees (out of 676) who agreed to buyouts amidst continued financial losses. Other recent examples include KLab, gumi and Enish. Beyond mobile games, last year, data from Japan’s pension service showed that major developer Bandai Namco Studios had downsized by 117 employees in a year, although the circumstances remained unknown.
