Even if you agree that there was a recession the US exited it a year ago. The economy has been growing since last August.
This (and other layoffs) are a response to increased interest rates imposed to combat inflation. Companies don't have access to as cheap credit, so they're trying to appease shareholders by cutting costs to improve profitability.
This puts the brakes on the economy and may cause a recession if it goes too far. But the US economy is not currently in recession by any definition.
This specifically and undeniably is what is killing unity too. They have always run on free money, they have literally never turned a profit in the history of the company, and with the end of 0% interest rate policy the music is over.
The fact that they borrowed bigtime to buy this adtech company (hence the push for “if you use our ads, no fee increase!”) and are now deeply deeply underwater is forcing the issue, they have gone from losing $100-300m per year to losing $800m-1b per year. But, again, unity has literally never turned a profit in the history of its existence.
The same thing is happening across the industry where the end of free money is putting some boondoggles out of business, burning out the waste that has resulted from 2+ decades of unconstrained tech growth in a ZIRP environment. A correction was inevitable and healthy, excessively cheap money has all kinds of noxious effects on an economy.
The most prominent is xbox - I don't think anyone realized just how bad things have gotten for xbox but the FTC leaks are devastating, they reveal the xbox division has been on the ropes for quite a while. They have been in severe risk of being closed if they can't make gamepass numbers perform, and they've massively undershot the scenarios in which (two or three years ago) Phil Spencer said he'd close the division. It's entirely possible that Starfield is the last straw, and if they don't see a big bump in gamepass subscribers from it (which doesn't seem to have happened) they may spin off the game-studio side and kill xbox, or pivot it into a "nettop" that competes more with appletv and switch pro type hardware.
It’s also resulted in some businesses making some crazy pricing model changes and other things, out of a real or perceived need to get to profitability. The unity change will kill the business, and things like google business spinning off domain registry (you need to use a third party service to get a complete offering on google cloud?) are pound-foolish decisions that will/could have long-term negative consequences.
But the tide is going out and we’re seeing who’s swimming naked, as they say. There were a lot of businesses and projects that were only sustainable with 0% interest money, and companies are rightfully asking if this is worth it if they have to pay 7% or 8% interest. And that's exactly the type of unproductive work that needs to be burned out of the economy.
the xbox stuff I wanted to give more explanation and sourcing/perspectives without bloating the above
PS5 has won the console war, Series X's hardware advantage has been subsumed by upscaling into a meaningless "runs 840p instead of 720p input res" thing that doesn't sell consoles and Sony has actually organically built studios that pump out exclusive content that does draw in customers. Microsoft has largely failed at building that, and instead tried to buy more studios to make their content exclusive (bethesda, tried to buy nintendo and activision, etc).
Microsoft has pretty explicitly pushed all their exclusives to PC as well, meaning Series S and the Gamepass are the only interesting thing they have going. And gamepass simply hasn't been doing the necessary numbers - there was a bump in 2020/2021 from COVID, when silicon shortages meant Series S was the cheapest and most available route to a diversion during the COVID disruptions, and gamepass gave you this ready library. But 2022 and 2023 have been the great Going-Outside and the numbers have gone down not up.
In the meantime Series S is also this albatross around their neck - they have a much lower hardware baseline for game compatibility, and can't really push forward to next-gen without losing those subscribers (who are probably not going to "convert" again if it requires a $700 purchase or whatever). like it or not they are trapped by series S and gamepass now, and there is no true next-gen console on the radar (unlike sony), only a refresh.
Another problem is that all those gamepass subscribers are using the "$1/mo for 5 years" crazy promo deals too. Which is another perfect example of crazy VC growth-hacking stuff that is being rightfully burned out.
the FTC leaks are absolutely devastating and reveal a company that is so on the ropes they're looking at closing the xbox division, or pivoting it to nettop style consoles and going after appletv and switch pro (docked) market, perhaps with an upscaling-based ARM console. They are drastically underperforming the scenario in which Phil Spencer said he'd pull the plug. But it sure as fuck isn't going to be running like it currently is, in another 5-10 years, unless they get a whole lot of market traction awfully fast.
I do think it's entirely possible that Starfield was their last shot - big flagship title from a big flagship studio, and if they didn't do the gamepass numbers (and they didn't) this is the final straw. MS has very explicitly avoided weighing in on a true next-gen console and maybe they pivot or kill the division off instead. And this leak is so embarrassing and reveals how much things are so on-fire internally, that the leak itself may push them over the edge too, on top of starfield underperforming this month. This is C-suite level deliberation laid bare.
But it's stunning to see this (ostensibly) gaming pillar/institution fall apart like this... apparently they were swimming naked too. But I guess that's not surprising, their only real traction was during the XB360/PS3 era and every single other time it's been a money pit they dump cash into in hopes of being profitable next generation... everyone kinda knew it intellectually but without the scales of losses being broken out separately, it's just an abstract point. Now we know: Xbox is losing so much cash they will probably go under shortly.
(which is a great reason to prevent them from acquiring more studios, especially when the goal is obviously to take their content exclusive to combat Sony's organic exclusives. That's anticompetitive to the core.)
Well, they aren't going to in front of the FTC and make themselves look huge and successful and dominating, now, are they.
Phil's entire job is to communicate the idea that they have to acquire third-party studios to keep the business running at all. "If you don't let us buy Activision, then we'll just be forced to fold our tents, and then there will be even LESS competition. You don't want THAT, do you?"
When in reality, Microsoft's attitude toward the Xbox division has always been more like Citizen Kane. "Why, yes, we lost $100 million last year, and we're on track to lose $150 million this year. At this rate, if things don't improve, we might have to shut this place down in... let's see... 12,000 years."
> Companies don't have access to as cheap credit, so they're trying to appease shareholders by cutting costs to improve profitability.
It's not just profitability and shareholders, although those are good indicators of whether or not you're overspending. If the cost of capital goes up, something has to give to pay for that.
This (and other layoffs) are a response to increased interest rates imposed to combat inflation. Companies don't have access to as cheap credit, so they're trying to appease shareholders by cutting costs to improve profitability.
This puts the brakes on the economy and may cause a recession if it goes too far. But the US economy is not currently in recession by any definition.