Predicting layoffs: How to check your studio’s health

Hi all! With the spate of layoffs recently, I’ve been thinking of how to assess a studio’s health so you can predict whether or not doom will come, and when. These are various ways I usually assess a studio’s health, and it’s upon that basis that I make the staygo”sorry, I’m booked out for months and regrettably unavailable for contract work” decision. This article applies mainly to full-time employees, but it could also be useful for contractors wanting to know if their clients will continue to have money to pay them.

I’m still new to the stock market side of things, but I’ve been trying my ass off to pay more attention to this ever since I worked at a THQ studio that was recently hit with massive layoffs. Following that rollercoaster has been instructive.

So, these are my questionscritera in no particular order:

  1. Track publisher stock movements and events. Sign up for Google Finance, add the big pubs (ATVI, EA, TTWO, THQI, ZNGA, UBSFF, KNM, NTDOY, CCOEF). How was their last quarter? Year? 5 years? How close are their sales projections to the actual reality when they release quarterly reports and how do they spin it? What obvious lies can you identify over time and what’s the common thread between them? What time of year have they historically performed “restructuring” and layoffs? (usually financial quartersbeginning of FY, but still.)
  2. Subscribe to the news. GamaSutra Newswire and to get a decent spread of up-to-date information on the industry. I subscribe to their RSS feeds in Google Reader so I only have to go one place to check. I also check GameTab occasionally, but I’ve had connectivity errors with the site recently. Beware of rumors and fearmongering, but still pay attention.
  3. Track patterns in press releases. Are there patterns between sequences of press releases like “This game will sell 5m!” – > “We have faith in the product.” – > “The product’s sales fell short of our expectations.” – > “In order to cut costs after disappointing sales, we’re restructuring our organization and have reduced [studio]’s headcount by 75.” How cyclical is this? Is there a predictable sequence of announcements that could give you an indication of what’s next?
  4. Know your publisher’s product catalog. Find out their fiscal year dates, and other games’ ship dates. What has happened to them when they miss a date? What is the organizational health and reputation of other owned and non-owned companies under your publisher’s umbrella? If you had to guess and be realistic, if shit hits fan which studio *should* be shut down first?
  5. Know your company’s track record. When did your company ship its last title? How did it sell? How did it rate on average? How about the one before that? Do they have a track record of missing ship dates?
  6. Know your genre. What genre is your game? Does that genre tend to sell well? Who are the biggest players in that space and are you competing directly with them, or trying to find a new take or angle or iteration upon the genre? Do you think your game compares favorably? And is its release date close to the release of another juggernaught in the same genre?
  7. Know your studio’s employee retention rate. How many people there tend to stay for the long haul versus staying only a year or less before moving on? “How long has the average employee at your company worked there?” is a question I have ALWAYS asked in an interview and it often makes people uncomfortable. 🙂
  8. Know who runs your company. Who are the principals of the company and what’s their history? What’s their relative rate of success with regards to companies runmanaged previously, success of previously shipped titles, how long they’ve leadmanaged? How long have they worked at the same company both currently and in the past? Mainly, find out if they hop around or commit for the long haul.
  9. Know your team’s history. Has this team worked together before, either as a whole or in small groupscliques? Check previous companies. Look up all the leads up on LinkedIn and Mobygames and map out concurrent employment and previous working relationships for future reference. Write it down.

That’s all I’ve got off the top of my head for basic high-level stuff. I could dig deeper into tech and so on, but this is a lot of data already. Still, these are all considerations I consider important and I’ve always dug into companies in this way and add to the list of criteria over time.

I’m curious what people think, and I welcome comments and feedback! If I’m completely full of crap, please let me know because I want this to be better. 🙂 Thanks guys!

[update] Thanks to Dave Shramek and Matthew Weigel for informing me that EA’s stock symbol is now EA (not ERTS) and to include Zynga (ZNGA)! [/update]

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