A gaming executive says the recent layoffs at Inflexion Games and the full closure of Humanoid Origin have been influenced by investment in gaming companies being scaled back and the ongoing absence of a tax credit program in Alberta.
"It's well known that during the course of the pandemic, interest in gaming skyrocketed, both as a business opportunity and fuelled by people consuming games at home during lockdown," Scott Nye, the chief operating officer of Inflexion, told Taproot. "That led to a significant amount of investment. Those times of expansion, probably, were too aggressive. Now (the industry is) settling back into a more sustainable version of itself."
In October, Inflexion laid off at least 66 employees. The studio was founded by Aaryn Flynn, a former general manager for BioWare, and was originally owned by Improbable and later sold to Tencent.
Weeks later, Humanoid Origin announced it would close and let go at least 53 people. Like Flynn, Humanoid Origin founder Casey Hudson made his name at BioWare with work on blockbuster titles like Mass Effect.
Both studios offered statements on LinkedIn.Inflexion said "the industry is undergoing a period of significant transition." Meanwhile, Humanoid Origin said there are " broader challenges in the industry" that caused the studio to close.
Taproot contacted Humanoid Origin but the company declined to comment for this story.
Nye's assessment of industry woes is echoed by reports that suggest that the global gaming industry has laid off more than 23,000 people over the last two years.
Dorian Rowe, the interim executive director of the Edmonton Screen Industries Office, also sees the trend. The organization is a city-funded entity that supports gaming, film, TV, and broader interactive digital media (often called IDM).
Rowe said the cash contraction in games is in step with the strains on other screen-based industries, but isn't catastrophic.
"I wouldn't characterize it as a burst bubble. It's maybe a bubble that's shrinking a little bit, or maybe coming back to a 2018 or a 2019 level, versus the peak of, let's say, 2021," Rowe told Taproot. "In media in general, but I would say in (the) video game industry for sure, if (you) think that you have a crystal ball on the immediate future of the video game industry or any media industry — good luck … Predicting hits, predicting things that aren't hits, that's always super, super challenging."
A file photo from the 2013 event Intersect shows local interactive digital media in action. The sector, and particularly gaming, is facing challenges that include shrinking investment dollars right now. (Mack Male/Flickr)
Inflexion's debut game, Nightingale, was hyped up to be a hit. In February, it went into early access mode, a stage where studios seek feedback from early adopters to take a viable product to its greatest potential. Several updates later (with the latest on Dec. 17), sales have not been quite what the studio hoped for.
"The game didn't meet some of the financial numbers that we needed it to meet. You can't hide behind that, there's a reason why we had to go through that restructuring," Nye said. "At the same time, the update that we were able to produce and push live to players in September, that was a fundamental change in how players experienced the first 10, 20-plus hours of Nightingale (that) completely changed the game."
Nye added that review scores are trending upward on Steam, the giant online gaming marketplace where Nightingale is sold. Steam's user satisfaction assessment on Dec. 16 rates 416 recent reviews as "very positive" and the grand total of 13,253 as "mixed."
But it's more than just industry trends and sales metrics that pose challenges for game studios in Edmonton — or Alberta. Nye said Alberta lacks incentives that British Columbia, Ontario, Quebec, and other provinces have. That's partly because the interactive digital media tax credit, instituted in 2018 by the Alberta New Democratic Party government, was swiftly suspended when Jason Kenney became premier for the United Conservative Party in 2019.
Nate Glubish, the minister for technology and innovation, was instructed to propose a new version of the credit by now-Premier Danielle Smith in 2022. No new credit has been implemented yet.
"Those tax credits being in place, that is the fundamental reason why those jurisdictions are succeeding and have the more well-developed ecosystems in place that provide a softer landing pad when you see the times that our industry is going through today," Nye said. "Industry was strongly opposed to (Alberta's IDM tax credit) being taken away. And while there certainly have been indications and promises and commitments made in the last two years, certainly two years ago, they never came to fruition."
Inflexion makes use of tax credits in B.C. and Quebec because the studio employs people there. It's easier to land after a layoff in places like those, Nye said, because workers can "go across the street to work somewhere else," which is a "very limited" option in Edmonton.
Rowe with the ESIO said the organization is working on "new programs" for 2025, but could not announce details yet.