PlayStation's low profit margins lead to mass layoffs, studio closures, game cancellations

Mass layoffs hit Sony's video games division and some 900 people are believed to be affected.

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Just yesterday I published an in-depth look at PlayStation's profit margins across the last 7 quarters, and as I was writing, I came to a sobering conclusion: More cost-cutting is coming. The profit margins are just too low. Sadly, that was confirmed today by PlayStation's soon-to-be-gone CEO Jim Ryan.

Sony Interactive Entertainment today announced that it will lay off 900 people, or 8% of its global workforce. The London Studio will close down completely, suffering the same fate as Sony's Japan Studio. All-star teams responsible for billion-dollar franchises aren't immune to the cuts, either: Insomniac Games, Naughty Dog, and Guerrilla Games are all being hit by layoffs, with the Horizon developer Guerrilla cutting about 10% of its staff, or 40 people.

As funding for jobs gets cut off from corporate HQ, so too does the projects themselves, and Sony has cancelled a number of first-party projects.

Sources tell Bloomberg's Jason Schreier that Firesprite's Twisted Metal live service game was also cancelled. This project wasn't even greenlight, however.

SIE Worldwide Studios head Hermen Hulst also had this to say about the cancellations:

We looked at our studios and our portfolio, evaluating projects in various stages of development, and have decided that some of those projects will not move forward.

I want to be clear that the decision to stop work on these projects is not a reflection on the talent or passion of team members.

This drastic business move comes after PlayStation delivered steadily-worsening profits over the last seven or so quarters. Multiple factors led to these low operating profit margins, including higher development costs, lowered profits on hardware sales, and expensive acquisitions including Sony's buyout of Bungie for $3.7 billion.