According to a report by Bloomberg News on Tuesday, Amazon's streaming service Twitch is planning to reduce its staff by 35%, which means around 500 employees will be affected.
The report, based on information from sources close to the matter, suggests that these layoffs could be announced as early as Wednesday.
This decision is attributed to the region's high operations costs and network fees. Additionally, Twitch laid off over 400 employees in March of the previous year, following a period where its user and revenue growth fell short of expectations.
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Twitch's Future Direction: Major Workforce Reduction
Amazon, which acquired the streaming platform Twitch for approximately $1 billion in 2014, has made several significant decisions shaping the future of the live-streaming platform. These decisions include introducing and later retracting an 'artistic nudity' policy that stirred the community.
The company's financial difficulties are the primary cause behind the significant job reductions at Twitch. Even though Twitch has been a dominant force in the streaming world since its inception in 2011, it has not yet achieved profitability. High operating costs, especially in some regions, have been a significant challenge for the company.
The departure of several top executives from Twitch has exacerbated the situation. Moreover, Twitch declared its decision to shut down its office in Korea in December due to excessively high operational expenses. The closure of the Korean office is scheduled for February.
In his open letter, Twitch's CEO, Dan Clancy, explains why Twitch decided to reduce its workforce. He mentions that the company had previously tried to become more efficient through other methods, though he doesn't specify what these were.
Clancy states, "Unfortunately, despite these efforts, it has become clear that our organization is still significantly larger than necessary for the scale of our business." He acknowledges that Twitch paid over $1 billion to streamers last year.
However, he also points out, "Like many other tech companies, we are now adjusting our workforce size based on the current size of our business and cautious forecasts of our future growth."
In addition to Twitch, other Amazon divisions face workforce reductions. Amazon has announced the elimination of hundreds of jobs in Prime Video and MGM Studios, as reported by Deadline. This news follows a significant period of downsizing for Amazon, the largest since the company's inception, with a total of 27,000 jobs cut between 2022 and 2023.
These job cuts come shortly after Amazon introduced an advertisement-supported tier for their Prime Video streaming service at the end of December.
Gaming Industry's Mixed Fortunes: Layoffs and Releases
Twitch isn't alone in facing difficulties in the gaming industry. Unity Software, a key player in game development software, is also laying off a quarter of its staff as part of what they call a "company reset."
The year 2023 presented a paradox for the gaming world. It was noteworthy for the release of numerous games, yet it was also a year marked by significant layoffs across the industry. These layoffs not only reflect the unpredictability of the gaming sector but also highlight the economic challenges that these companies are grappling with.
It will be intriguing to observe how Twitch, now operating with a reduced workforce and increasing pressure to turn profitable, will adapt to the fiercely competitive and ever-changing game streaming market.
These layoffs are a harsh reminder that even the most renowned and successful firms are vulnerable to economic downturns and the need for organizational restructuring.
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