GOG lays off at least a dozen employees after financial struggle [Update]

Joseph Knoop, Tuesday, February 26th, 2019 4:30 pm

Update (2/27/2019):

Adding to the financial stress on GOG, the company announced Wednesday that it would be ending their Fair Price Package for consumers, as reported by gamesindustry.biz. The policy means that GOG would absorb any increase in price if the game was more expensive outside of North America. Consumers who bought games that were affected by the FPP were given the difference in funds in their GOG wallets.

Typically, this was about 12 percent of the game’s price, but was known to go as high as 37 percent.

“In the past, we were able to cover these extra costs from our cut and still turn a small profit,” GOG said in a statement. “Unfortunately, this is not the case anymore. With an increasing share paid to developers, our cut gets smaller. However, we look at it, at the end of the day we are a store and need to make sure we sell games without a loss.

“Removing FPP is not a decision we make lightly, but by making this change, we will be able to offer better conditions to game creators, which — in turn — will allow us to offer you more curated classic games and new releases. All DRM-free.”

In Kotaku’s original reporting on the GOG layoffs, an anonymous employee told the outlet that the Epic Games Store’s increased revenue cut would or was already putting pressure on GOG to catch up.

“GOG’s revenue couldn’t keep up with growth, the fact that we’re dangerously close to being in the red has come up in the past few months, and the market’s move towards higher [developer] revenue shares has, or will, affect the bottom line as well,” the employee told Kotaku. “I mean, it’s just an odd situation, like things got really desperate really fast.”

The program is scheduled to end on March 31, and GOG has stated that any funds received from the program will last for a year.

Original Story:

Following alongandgrowinglistofrecentgame industry layoffs, the digital games seller GOG has stated to Kotaku that the company laid off a dozen staff members last week.

GOG, which is owned by The Witcher and Cyberpunk 2077 developer CD Projekt, has not explicitly stated why the layoffs took place, but some reporting from Kotaku via anonymous GOG employees suggests that financial struggle played a significant role.

In their official statement to Kotaku, GOG reportedly said: “Letting people go is never easy. We have been rearranging certain teams since October 2018, effecting in closing around a dozen of positions last week. At the same time, since the process started we have welcomed nearly twice as many new team members, and currently hold 20 open positions.”

Separately, an unnamed source who was affected by the GOG layoffs told Kotaku that the move was made due to the company’s increasingly troubled finances.

“We were told it’s a financial decision,” the source told Kotaku. “GOG’s revenue couldn’t keep up with growth, the fact that we’re dangerously close to being in the red has come up in the past few months, and the market’s move towards higher [developer] revenue shares has, or will, affect the bottom line as well. I mean, it’s just an odd situation, like things got really desperate really fast. I know that February was a really bad month, but January on the other hand was excellent. We were in the middle of a general restructuring, moving some teams around, not unprecedented. But layoffs that big have never happened before.”

The digital game seller market has gotten notably more competitive in the last couple months. The ongoing PR war between Valve’s Steam and the Epic Games Store began when Epic announced it would give developers and publishers an 88 percent revenue cut, as opposed to Steam or GOG’s 70 percent.

GOG also ran into a PR fumble when a representative for the company used a hashtag related to trans rights to make a joke. As if to invite controversy, the tweet, which has since been deleted, said “Classic PC Games #WontBeErased on our watch. Yeah, how’s that for some use of hashtags.”

The #WontBeErased hashtag arose in the wake of a leaked memo from the Trump administration that indicated the administration was aiming to narrow the definition of “sex” under Title IX of the Education Amendments Act of 1972. Such a move would severely limit the protections transgender people are afforded under federal law as a protected class.

GOG later released a statement saying: “The tweet was neither intended as a malicious attack, nor as a comment to the ongoing social debate. GOG should focus only on games. We acknowledge that and we commit to it.”

Months before that, GOG posted an image of a tombstone reading “RIP games journalism,” with a 2014 date that aligned with the beginning of the online hate group known as Gamergate. The cause of death on the tombstone was labeled as suicide. GOG later apologized.

Similarly, CD Projekt Red, which is working on the upcoming Cyberpunk 2077, which deals with issues of transhumanism, elected to tweet out a “did you just assume their gender” joke. CD Projekt Red later apologized for that tweet.

In the realm of finances, CD Projekt released their Q3 report on November 14, 2018. Their Q4 report (which is also the company’s full year report) is not due out until March 21, a particularly late date. That said, financial report dates are typically set in stone well in advance, so it’s highly unlikely that CD Projekt hoped to obscure any financial woes by releasing a Q4 report so late into early 2019.

Thronebreaker, the standalone Gwent card game/RPG based on the Witcher universe, was previously struggling to break sales expectations since it was initially only available on GOG. Thronebreaker was later added to Steam to help make up for that lack of sales, according to Polygon. Thronebreaker released on October 23 on PC (on GOG) and December 4 on PS4 and Xbox One, so considering CD Projekt’s Q3 report released in November, it’s difficult to gauge how much (or little) an impact it had on the company’s future finances.

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