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Do we actually value people in this industry or not?
by Alan Wilson on 03/06/14 05:23:00 pm   Expert Blogs   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.


The last few weeks have seen yet another round of layoffs and closures in the industry. Eidos in Montreal dropping staff post-Thief, Sony in Santa Monica killing a new IP and, perhaps most shockingly, 2K shuttering Bioshock Infinite developers, Irrational. The companies concerned behave in their own fashions. 2K organized a recruitment fair for the Irrational devs, which we attended. Sony are working to "ease the transition for those impacted". Eidos are also trying to run a career day or re-locate staff. Not to mention 700-odd staff from Disney.

But the reasoning often troubles me:

"it’s something that every major studio has to do sometimes in order to ensure you have the right set up for current and future projects"

"sometimes it is necessary to make changes to better serve the future projects of the studio"

And, to quote badly out of context, but a phrase that does rankle:

"as we focus not just on getting to profitability but sustained profitability".

This spawned a small discussion piece on IGN ("Do Layoffs Scare Away Talented Developers?") and subsequent discussions on LinkedIn, that had me thinking about an old term: "human capital". Back in the 80s, people started babbling about how people were our most valuable resource in large (service-based, therefore people-based) companies, how we should invest in our people, create "human capital". Mostly lip-service, but it did lead some academics to take throwaway lines from smarmy CEOs literally and explore both how one would handle that from a financial standpoint, as well as what the cost implications might actually be.

To the latter point, there seem to be two separate business models, both related, but the approaches at odds with each other.

The one that rankles so badly with me is the one we seem to see lurking in this industry all too much. It involves ramping up teams (that is teams of PEOPLE, real human beings, with lives, families, mortgages, hopes and aspirations), with wonderful promises of great things to come. The times may be good. Those good times may last. But all too often they aren't - and they don't. The challenge isn't new. It is that games development is very often very project-based. A big game to get out the door, with a budget of millions of dollars. Costs to recoup, profits to be made and declared to shareholders. And what happens at the end of that project? What happens when the project no longer needs all those skills? Far too frequently, it seems - layoffs and closures. From an accounting point of view, get those costs off my Profit-and-Loss statement, please - and as quickly as possible. They are simply a very significant portion of my costs, reducing my bottom line, just by existing. Shoo.

The other, that we follow, because we are, of course, quite perfect, is about building permanent teams in a sustainable fashion. We don't staff up for each project and then staff back. We work out what we can achieve and when, based on the resource we have and the resource we can (sustainably) add. Where we can see we will be over-stretched, we look to outsource. We look for partners who specialize in juggling project work to sustain their own workforces. That's what they do - they have a certain resource pool and work to keep that pool as busy as possible at all times. Now, before anyone tears in, we know we aren't perfect. We've made mistakes recruiting over recent years. We have felt horrible the couple of times we have had to let someone go. Nothing like as bad as it is for the individual, obviously.

This also means that we can only deliver projects on the timings that our resource will allow. Timings have to be flexible. Which delays the Revenue side of the equation on the infamous P&L. Which makes accountants wince, again. Which also means that we monitor forecast Cashflow very carefully. Not forecast Profit - forecast Cash. Related, but NOT the same thing.

Whatever people say to the contrary, so much of this industry is driven by a project-driven (read game release driven) mentality. Profit and Loss. There is a set of Costs (mostly people), followed, hopefully, by a load of Revenue, which should be greater than the Costs, generate Profit and keep us in business. That's all good - and should generate both Cash and an increasing value of the business. So WHY do we see so many companies dropping people out the door, with sad excuses like those above?

Because they do not see any monetary value in those people. Those people are not an investment - they are just a cost. In accounting terms, sadly, they are pretty much Consumables on the P&L, not Assets on the Balance Sheet. And you know what? This is wrong - and not just morally.

Yes, morally, it sucks. Hire a bunch of people, have them build something, dump them, make money, rinse and repeat. But the moral argument obviously isn't enough. So here is an argument for all the suits and bean-counters making the "hard business decisions", because "you can't put a value on people":

Actually, yes you can. They go on the Balance Sheet under Intangible Assets. Go look it up. Here is a link to the theory and a worked example (in PDF format). Written by economists and has funny squiggly equations in it. "But that is theory - who uses that?". Well, as it turns out, Infosys (INFY, Market Cap $35Bn. Yes, that is Billion, with a B) does, for one. To quote from their financial statement:

"Intangible assets: The intangible assets of a company can be classified into four major categories : human resources, intellectual property assets, internal assets and external assets.

Human resources: Human resources represent the collective expertise, innovation, leadership, entrepreneurship and managerial skills of the employees of an organization."

Hey look, accountant-types - you CAN put a value on people. You can put them on your Balance Sheet and demonstrate to investors what incredible value you have created. Now they aren't just an annoying cost to be discarded at a moment's notice. People actually ARE a valuable Asset! Who knew?!

And back to the original point: Do we actually value people in this industry or not? Well, no, apparently we don't. All too many just pay lip service to the concept. People are treated as Consumables, not Assets. Well, I'm sorry, but you're wrong. Morally, of course - but being morally correct doesn't seem to count. So, you're also wrong in accounting terms. Those people ARE Assets, with real value, to be nurtured, invested in, protected - and kept. That is extra Assets on your Balance Sheet. Actual increased valuation for your shareholders - AND morally less reprehensible at the same time.

Go stick THAT up your effing Balance Sheets.

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David Crain
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I'll take your word on the Intangible Assets part but otherwise, brilliant piece. I'd like to add that some devs don't even wait until project completion -- their MO is to start "rolling off" people when their game hits alpha!

This industry has been around since the mid-80s yet the business practices are still immature. I doubt anyone in the trenches will ever retire -- in the traditional sense -- from the games industry.

Anthony Farmer
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As long as the industry chews up & spits out people before they're able to get into Sr Mgt roles, you'll always have inexperienced people at the helm. Same old mistakes over and over because anyone who's learned isn't in charge or has left.

Ken Love
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.. OR... "Co$t$ too much to keep."

Their reasoning being… "Why should we pay 100k for just one single person?!?"

Nope, instead we can hire 2 or maybe 3 "juniors" that we can ramp-up and / or indoctrinate them with our philosophies. You know.. "Mold them into who we want them to be." FOR ALOT LE$$.

Sure, it'll take some time to get them up to speed, but.. "Geez! Think of all the money we'll save."

"Bonuses everyone!!" Well, for management anyway.

.. AND that's why I'm in management and you're not. ;-)

Kenneth Hurley
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Excellent piece.

"Those people ARE Assets, with real value, to be nurtured, invested in, protected - and kept". I was going to say that I didn't think that a public company could put people on your balance sheet. I'm glad you pointed out that InfoSys (a public company) is doing this.

It is amazing that more companies don't figure out how to add these assets to intangible assets on their financials. The time invested in training and developing employees is definitely an asset. A new employee takes 30-90 days to completely ramp up. Also companies don't think about the cost of acquiring new employees. Why not retrain current employees?

Thank you for the very enlightening article.

TC Weidner
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It all leads back to these large corps and their misguided faith in the Milton Friedman perspective on business and basically life in general. Is life really only about making as much profit as possible at any cost? Its a ridiculous, destructive, and even evil assertion and conclusion but so many find it a convenient way to go about rationalizing their greedy ways.

Its like the assholes who try to create cover for themselves by saying things like " well, its only business".. well in truth.. no it's not just business and it never was. There is no separating business from the personal, no matter how much these greedy bastards wish it, it doesnt make it so.

I always say, if you are struggling with a decision, Look at it from the perspective of your death bed. When you lie there in your final hours, will you really think back and think it was worth it to screw over hundreds of workers/associates/friends, and their families? Is the chaos you caused them really worth the 15% temporary blip in a stock price and the money you made yourself by exercising some stock options? well if you conclude screwing people for money was worth it at the end... well then.. you have learned nothing in this life.

Joshua McDonald
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If you believe that Milton Friedman's philosophy (and the free market philosophy in general) is that life is about making profits at any cost, then you don't even have an elementary understanding of it.

What I like about this article is that it recognizes the existence of reality (specifically, you can't employ anyone for long if you're company's income doesn't exceed its expenses) and instead talks about why valuing people is a strategy to INCREASE profits. If the same solution will give a businessman his profits and an employee his stability, that sounds like a pretty awesome solution to me.

TC Weidner
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If you believe its not about money and profits above all else, ( especially for the shareholder) then it is you then my friend who doesnt have an elementary understanding of what you have bought into. But dont fret, many many people spend good hard money being taught repugnant ideas such as Friedmans. The world is the way it is for a reason. 85 humans dont get to have as much wealth as 3 billion combined by accident. But you keep on thinking your not being played.

Joshua McDonald
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The free market is not a philosophy of life. It's a philosophy of government's role in economics that, simply put, says, "the government should interfere as little as possible in economic activities between consenting adults". That's it.

If you follow both your own link and then the link it gives to Milton Friedman's speech, the first point that your article tried to refute was when Friedman said that rather than looking at corporations as their own entity, we need to look at the people involved. A corporation is just a combination of acts of individual people. It is not a separate, thinking entity.

The fact that corporations are legally a separate entity isn't part of the free market. It's a violation of the free market because the government is allowing people to play by different rules (essentially, dodging responsibility for failures) if they join in an entity like a corporation.

I'm happy to have an intelligent debate, but if you if you continue to use condescending lines like "But you keep on thinking you're not being played", I'll consider that evidence that you're way too close-minded for that.

TC Weidner
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Im not about to try to convert you or anyone else in a gaming forum from the religion of the "free market". Free market believes that supply/demand and profit can create a functioning society, its nonsense. There is more to life and business than profit. You need a balancing entity to look out for general welfare, the environment, the future, equality, etc etc..

If left to Laissez-faire attitudes we would have more air quality such as Chinas right here at home in the US.

BUT..I will grant you that much of our problems are not just the worshiping of the "free market" but in fact it that the entities that are needed to balance the free market are themselves captured and ruled not be the people, but by the very same businesses and people that preach "free market". We have in essence the worst of both worlds now.

Joshua McDonald
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You're still defining "free market" as an all-encompassing moral philosophy rather than simply a belief in minimal government involvement in consensual acts. I have never, in my entire life, encountered anyone who believed that centering life simply around supply/demand and profit was a good thing.

I do find it interesting, though, that to explain why the free market is bad, you pointed to a country with far more government control than the US.

TC Weidner
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I have never, in my entire life, encountered anyone who believed that centering life simply around supply/demand and profit was a good thing.

our entire society is based on greed.

Profitable companies are laying people off.. that's the topic at hand. So they layoff people for what? giggles and kicks?

as for china, air quality shows you what happens when the govt doesnt do its job. I compare it to the US because that could of been us if the govt didnt actually step up and doing something right 40 some odd years ago. Clean air and water arent in the free markets interest at all.

Joshua McDonald
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What you're repeatedly proving is that you haven't taken the time to understand what free market economics actually means. You've created a caricature of what you think free marketers believe and you're putting all of your energy into beating up that caricature.

Again, you're still defining it as an all-encompassing moral philosophy.

TC Weidner
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No actually I understand them all to well, and if you dont see them as a defining moral characteristic and philosophy then you are only fooling yourself. ... " Hey its not personal.. its only business" .. right?

Have a nice day.

Joshua McDonald
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Yeah, I'm out. I can't argue with someone who is positive he knows exactly what is in the minds of everyone around him.

Juliette Dupre
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I think some mild layoff periods are a fact of every industry and a cost of doing business. BUT, they are and should be a rarity and last resort. Especially from a recruiter perspective, you never want to see your hard fought talent let go!

IMO large-scale game developers don't even try to mitigate tragic, habitual, major layoffs. They seem to really take it to another level with outlandish budgets and ROI expectations that basically ensure major layoffs at the end of every project. It's apparently become the modus operandi. In mobile, our structure and business model just wouldn't function if we ran like that. You do see the occasional small layoff in a company of our size, but it's not part of the business plan and daily ops the way it seems for others.

I don't know why more developers aren't interested in mobile for that reason actually. We have a tough time getting folks to appreciate the stability mobile offers. I know large console/pc developers who rely on large layoffs make it tougher for people to trust what we offer, but I don't know if that's the whole explanation. I feel like a lot of developers look down on mobile and I can't understand that viewpoint given the good opportunities, shorter dev cycles, small teams, etc, etc.

Ken Love
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I agree with you to a point on this, J. BUT.. Mobile isn't entirely safe, either. ("Of course, what is this these days?")

The perks are nice. Freedom of creativity, Small Dev Team and Dev Cycles, Budgets, Etc.

The BIG problem with Mobile, as I'm sure you're aware of, is that of "discoverability" and keeping the player hooked to come back and spend more moolah. Discoverability probably topping that list, though.

You can churn and burn out as many games as you possibly want, but.. the chances of you making a lot of money, I believe are relatively slim. I'm not saying that a person or persons can't make some money, it's just that creating another Angry Birds, Clash of Clans or whatever other hit mobile game is very hard to do. "Almost a complete fluke, really."

AND.. Don't even get me started on mobile advertising. Unless you have deep pockets, as say like a big publisher, you'll likely not even do a dent in your sales. The money you have to spend just to maybe get seen by a few people, is simply ridiculous.

At some point in time, if yer' a small guy and you're barely eeking anything back on what you've made, I would tend to think you're gonna' have to make up your mind to either keep pulling cash out of your own pocket to go move forward in hopes of "making it" someday or.. possibly just close-up shop and chalk it up to a valuable lesson learned.

I've worked in both Console and most recently Mobile. Mobile I've been doing for the past 10 Years. Making mobile money back in the early 2000's was pretty easy compared to today. That's for dang sure.

Julianne Harty
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Accounting standards and rules would beg to differ on your assessment. Assets are things that the company OWNS. Until we get back into OWNING people, we can't claim employees as an asset, because they can choose to leave at any point. An asset belongs on the Balance Sheet - what happens on the Balance Sheet doesn't affect the P&L - one is a snapshot of the business, the other is a statement of activity. Even traditional assets - from buildings to brand awareness - get an impact on the P&L through expenses. So treating employees as assets will not change the industry cycle of hire-and-layoff that you propose; their salary/maintenance expenditures are still considered expenses that hit the P&L. They can't capitalize on that. Only training would.

Reading through Infosys' financial statements, it seems that they are actually claiming employee costs as what they are: expenses.

I don't disagree with the argument that they SHOULD be considered some form of asset, because of their value to the company; just that, in the current accounting climate, it's not possible. Besides, it still wouldn't solve the problems that you're saying is happening. Let's say you own a house that you don't live in - it's an asset. If the operation costs of the house (maintenance, taxes, etc - expenses) exceed the appreciated value of the house year-on-year (which you can't claim on a balance sheet anyway until you sell the asset), it doesn't make financial sense to hold onto it. This is certainly the case if you're not getting any revenue from the house, either directly or indirectly

It seems to be a cold way of looking at it, stripping the "humanity" away from people-as-an-asset. But I don't think it's immoral - what people don't tend to consider is what would happen if the company didn't have the layoffs and chose to bleed cash. It may work out; or the entire company may fold into bankruptcy, putting even more people out of a job. While it's unlikely that Sony or Disney will do so because of 1 studio... but I don't think it's completely fair that another division has to pass on the earnings of their hard work and efficiency to support a studio that has a lot of people sitting around doing little-or-nothing - an excess of human capital.

Look, I'm positive that these layoffs decisions weren't made flippantly. I'm certain that the people who were laid off were also considered for a transfer somewhere else in the company if there was need - trust me, it's more expensive to hire someone new and onboard them than it is to move an existing person. If layoffs were done with an eye to reducing costs, this option would've been the first to be considered.

Yes, there is anger and fear - that one day, it may happen to you. Believe me, the fear is also felt on the reverse, that one day your star employee will go work for a competitor.

Julianne Harty
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Oh, HBR has a great article about putting the value of people over profits:

Ken Love
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"Believe me, the fear is also felt on the reverse, that one day your star employee will go work for a competitor."

I SINCERELY doubt this. There may be "some" truth to this, but for the most part, I truly believe a lot of companies think along the lines of.. "His leaving us certainly sucks.. BUT.. Hey! There's a lot of fish out there in the interactive sea."

On-top of that, these companies need to bare in mind that when a new employee comes on-board, the new employee almost always has to sign an At Will employment agreement. I see nothing wrong with that same agreement being applied towards the employer as well. Good enough for them, good enough for me. "No hard feelings, it's just business." I believe that's the phrase management likes to use.

I think, rather than always go after the somewhat senior, mid and little guys on the ladder, perhaps management needs to look really within itself and check out how many cooks they actually have in the kitchen. From what I've seen, usually there are way too many. And to be quite honest, most of them don't even play games, let alone know a lot about them. Grant You.. "There are exceptions to every rule."

In reality, I don't ever see this happening. Imagine all of the people you could save by getting rid of a couple useless higher-up's. But, then again, there is no such thing as a useless higher-up, right?

Kaitlyn Kaid
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"I don't think it's completely fair that another division has to pass on the earnings of their hard work and efficiency to support a studio that has a lot of people sitting around doing little-or-nothing - an excess of human capital. "

I think that this shows an extreme failing of management to... well manage. A project launching is not exactly a surprise event, they know it's coming and (hopefully) when. A studio should have their next project lined up and ready to begin before the last one is over with.

Gary LaRochelle
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Exactly, Kaitlyn.

"A studio should have their next project lined up and ready to begin before the last one is over with."

There was a time when development studios consisted of three teams:

1. A Start-Up Team. Its make up was a game designer(s), an art director (with a concept artist) and programer(s) who figured out the basic coding format.

2. A Production Team. Artist and Programers who make the levels and do the majority of the game creation.

3. A Polishing Team. They polish the game and kill the bugs.

The Start-Up Team comes up with a game idea and verifies its worth. They then hand the design off to the Production Team who make the game. The Start-Up Team then starts designing a second game as the Production Team builds the first one. The Start-Up Team keeps an eye on the Production Team but their main concern is coming up with another game design*.
As the the second game start taking shape and the first game nears completion, members of the Production Team are moved to the second game. Soon most of the Production Team will be working on the second game as the Polishing team finishes off the first game.
This is when the Start-Up team gets to work on the third game. And so on.

There really is no need to build a game to completion then fire everyone, then hire them back when it comes to the production phase of the game. You're going to lose a team that has developed a way to work together and knows how to get a game done. And studio won't having to go through the looking for talent and hiring phase again.

* Just about everyone who works in the game industry has an idea for a game, no matter what their position is within the studio. Studio heads should encourage their employees to submit their new game ideas so as to keep the games flowing out and to keep everyone employed.

Simon Ludgate
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Don't forget that the boom and bust cycle is followed by yet another inevitable hiring boom, which incurs even more hiring expenses.

"Some professions may incur much higher costs than the average, especially when indirect costs are included. It may cost as much as $150,000 to replace an information technology employee who earns a salary of $60,000 a year, according to James Del Monte of JDA Professional Services, Inc., one of Houston’s leading IT staffing firms. Much of the expense is in indirect costs such as loss of training, loss of institutional knowledge, productivity losses, consulting fees and overtime expense. Del Monte, a Certified Employee Retention Specialist, recommends that employers focus on retention to decrease turnover."

Danny Liao
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When hiring a person, a business owner thinks, "he will make me 5$ and I would pay him 1$",
in the story below it was 20M and 20K,

Ed Alexander
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One of the biggest strokes of luck I feel I have ever had in my life was getting hired at the first studio I ever worked at. It was really quite hard to get hired there because they worked to build a sustainable culture where layoffs were a rare thing.

It was over a year applying for an entry level QA job before I even got the interview. I rolled onto the project just in time for Beta, and then right before we hit GM, I began to get nervous. It wasn't hard to figure out that what I contributed to the project wasn't exactly in high demand for what could potentially be measured in "weeks to months", and by then, I had begun to see the pattern of how things typically tend to work in this industry.

Just keeping an eye on Gamasutra, layoff articles were becoming more and more frequent. It seemed like every week there were new casualty reports cropping up. A deeply troubling sign, especially given that I was a greenhorn at the bottom rung of the ladder. If the newest guy there isn't the most attractive target for layoffs, who is?

Finally I expressed my concerns and was assured they weren't going to change their philosophy starting with me. New projects kept coming online and we all kept busy. I suppose now that I really wasn't in danger, but at the time, I was still sweating.

And then my big break came. My eagerness to prove that, while I may not be some gifted prodigy, I've at least got the chops to crush grunt level work and help take responsibility off someone else's overflowing plate. And so, I finally got the chance to get my hands into some tools. And after grinding on that for a while, another door opened into an unexpected opportunity.

Here it was. The moment I've been waiting for. A chance to finally escape the constraints of grunt work and show I can achieve more. The kiddie gloves came off, and so I grabbed that bull by the horns and slammed him to the ground.

After that project, I finally earned the cred needed to actually ascend into the development team. There were multiple different opportunities before that break where I could have just been cut and my later contributions would never have even happened. I would have been just a passing blip in the story of the studio, someone nobody really remembered. But the studio culture of my first gig allowed me to continue to grow, and ultimately proved to be one of the greatest things I feel has ever happened to me.

Now I aspire to become a founding partner of a privately owned (successful and very long living!) studio (that makes many different kinds of awesome games!) where I can help build and nurture a similar environment. It may be a ways before I'm finally able to start paying it forward, but hopefully by then, I'll be able to do it even better.

Florian Garcia
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I believe the game industry will soon become composed of entry level people. Other industries that pay MUCH MORE start to see value in the expertise of game developers.
I believe we'll start to see more and more experts leaving games behind. After all, if your job isn't that creative and not more stable than the current project you work on, you might as well get well paid doing easy stuff somewhere else.

Ken Love
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Completely agree with you, Florian.. AND… I think it's already happened, really.

Jon Solmos
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First thing - Thank you Alan Wilson for having the courage to write this very important article. I have experienced first hand the effects of the vicious game dev cycle: ramp up on the hiring of developers; develop game; ship game; lay-off (fire) developers no longer needed until next game. My first game-dev gig was as an artist that lasted 3 years at a mid-sized studio and during that time said studio went through 3 large layoffs of which I remained through each one. I experienced what many may know as "survivors guilt". Basically I was very angry with management, other co-workers who lacked empathy for those let go, and with myself. It seems like articles of this nature are becoming more prevalent - which is a good thing. The game industry NEEDS to change how it views its employees. As Alan stated in his article "Those people ARE Assets, with real value, to be nurtured, invested in, protected - and kept." I couldn't have put it into words better. But then again, I tried to-

I also would like to agree with Florian. Older developers are often victims of age discrimination so the statement that the game industry will soon consist of mostly lower entry-level (lower paid) employees seems pretty vaild. Here is another good article from gamasutra about this very topic:

I really do love this industry but some changes need to occur in order for it to remain a career choice for experienced developers. To end on a positive note, here is yet another article (last link, I promise) about how one studio is changing its environment to become a more stable place of employment: