More layoffs hit the video game industry: Analyst explains why

Microsoft (MSFT) is cutting about 650 employees from its Xbox gaming unit. It’s the latest in a string of layoffs that have impacted the video game industry.

Wedbush Securities Managing Director, Equity Research Michael Pachter points out that in Microsoft’s case, these jobs are redundant, stemming from its acquisition of Activision Blizzard last year. As for the broader industry, he said hiring increased during the pandemic when people were at home playing video games. Now, these companies are “right-sizing,” though Pachter thinks they may be cutting too many jobs.

Pachter also points to a broader shift in the industry, away from one where people buy the game once at a high price to one where there are in-game purchases. As a result, game makers don’t need to make as many games to gain revenue and customers are playing existing titles for longer.

Watch the video above to hear what Pachter thinks of Sony’s (SONY) new PlayStation 5 Pro and why Take-Two Interactive (TTWO) “has a lot of momentum.”

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This post was written by Stephanie Mikulich.