Bandai Namco Holdings Inc. is cutting its workforce after canceling several titles in the latest sign that rising costs and plateauing demand are depressing the gaming’s industry’s bottom lines.
The Tokyo-based company is taking a traditionally Japanese approach to reducing staff by sending workers to rooms where they are given nothing to do, putting pressure on them to leave voluntarily, according to people familiar with the matter. Since April, affiliate Bandai Namco Studios Inc. has moved about 200 of its roughly 1,300 employees to such rooms and nearly 100 have resigned, said the people, asking not to be named discussing private information. More are expected to leave in coming months, they said.
Such oidashi beya, or “expulsion rooms,” are sometimes used by Japanese corporations in a country with some of the world’s strictest labor-protection laws. Employees are typically given no work-related tasks, but are left with the knowledge that their performance will give managers ammunition to cut severance when they do leave. Many employees use their time in such rooms to look for other jobs.
The company’s shares slid as much as 1.2% in Tokyo Wednesday. Bandai Namco said its goal is not to push employees out of the company.
“Our decisions to discontinue games are based on comprehensive assessments of the situation. Some employees may need to wait a certain amount of time before they are assigned their next project, but we do move forward with assignments as new projects emerge,” a representative of Bandai Namco said. “There is no organization like an ‘oidashi beya’ at Bandai Namco Studios designed to pressure people to leave voluntarily.”
Bandai Namco is a storied name in the games industry, tracing its roots back to the introduction of the Pac-Man arcade title in 1980. Its current games include Dragon Ball and Gundam.
Like its competitors, the company’s now under pressure to cut costs and adjust to a post-pandemic drop in the time users have for games. Smartphone and online games have born the brunt of cooled sentiment, forcing Bandai Namco to overhaul its game title lineup, resulting in ¥21 billion ($141 million) in writedowns in the three quarters to December.
What Bloomberg Intelligence Says
Bandai Namco’s staff cuts, reported by Bloomberg News, show a sector that faces higher development costs, gamers’ limited attention spans for new games, and an expected game-revenue drop in Japan this year. This extends to peers such as Sony, which canceled its Concord title that was reported to have cost $400 million, as well as Square Enix, which like Bandai Namco incurred hundreds of millions of dollars in writedowns last year from cancellations.
- Nathan Naidu, analyst
Click here for the research.
Over the summer, the company further shuttered smartphone game Tales of the Rays and said it would take down big-budget online game Blue Protocol in January. It’s also decided to either cancel or pause development of several games, including ones that feature characters from animes Naruto and One Piece, as well as a project commissioned by Nintendo Co.
Rival Square Enix Holdings Co. also canceled multiple loss-making smartphone titles, while Sony Group Corp. pulled the plug on online game Concord just two weeks after its launch.
An anonymous website launched last month alleges that Bandai Namco is using various methods to persuade people to leave. The company is aware of the website, but the information is not accurate, a representative said, declining to elaborate.
I had never heard of “expulsion rooms” before, which does explains a lot on how layoffs happen in Japan.