Former CEO SCEA Shawn Layden: "Fortnite Effect" Reason For Current State of Industry

The video game industry is in a very perilous place. It seems, in recent years, a boom in COVID seemed to start the next great wave, but with studios seemingly issuing layoffs or even full closures, what feels like every week the overall state of the industry seems to be reaching a tipping point.

Who better to help dissect the current state of the market, especially the console site of things, than Shawn Layden. The former PlayStation CEO joined us for an episode of Theory Unlocked and while he told us he never wanted to do another performance review again, he gave us his performance review for the current video game industry.

Layden highlighted what he called the “Fortnite Effect”, which has completely upended how companies approached the market, with a goal of creating a forever game.

“A lot of big corporations looked at that business model, and thought hey recurring revenue, we can flatten the volatility of revenue that's typical of gaming. You spend a lot of money and launch your project and, hey, it's successful or hey it's not, and thats a problem. It has peaks and valleys. I think a lot of people who come from finance backgrounds want to flatten that curve.”

Layden went on to say that the new trend of CEOs in big gaming companies comes from backgrounds in finance rather than engineering, art, design, or marketing backgrounds.

“If you are a finance person, every solution has to be a spreadsheet. We tried to create the spreadsheetization of game development.”

Layden went on to explain that the boom created by the pandemic, with lowered costs from cancelled events like E3 and business travel and increasing revenue caused companies to buy big into gaming trying to all create the next Fortnite.

While Layden said he did not agree with the post-COVID trend, he even admitted maybe being in the game for over 30 years had blinded him to the future, telling a story of how in the early days of PlayStation Network there was a chance for Sony to acquire Twitch and he did not see it.

“Whose gonna spend their time watching someone else play a video game? Who wants to do that? Grandpa couldn't figure it out!”

Despite thinking, he was in the wrong, Layden said it appears now that instead of the castle in the distance, the successful forever game trend has vanished like a chimera. At the end of the day, Fortnite seems to be the expectation of the rule.