That's exactly what will happen.

A lot of new studios will form out of the ashes of these layoffs.

That's why you often see "from the former developers of X game" or similar in marketing for new games.

They do. There are plenty of indie Devs.

The reason why everyone doesn't do it is because it requires significant capital to be able to support a dev team through production for a number of years.

Not to mention they will still have to deal with publishers potentially fucking them over, as shown with the Helldivers 2 PSN fiasco.

Because game devs have to pay their rent.

If they go off to form their own studio, they probably have to take out a business loan to pay themselves for the time being. Interest rates are high right now, and rent and food are both expensive. It's a huge gamble to make a game and put it out on the assumption you'll be able to pay back 6%+ interest on whatever you took out. Games are not a reliable money maker. Especially from new studios.

Even if you get some sort of deal with a publisher to fund your first endeavor, there will still be strings attached to that, and publishers are pretty tight with the purse strings right now.

Which means really the only viable option, assuming you're not already independently wealthy, is that you have to work another job to work on the game in the meantime, which means it will take even longer to come out.

Why does anyone who works not make their own company? It takes capital and a certain skill set as well as a risk tolerance.

They do, though. Like, all the time. Many Indy companies start this way, and a lot of AA to even AAA studios started after high profile people were let go or otherwise left a bigger company to start their own.

Beyond just game studios, why aren't there more employee owned companies?

When Starbucks was unionizing I made the comment that if I were the corporation I would just get out and let the employees run it. I got flamed for this attitude. What is so terrible about employee owned companies?

Indie studios do in fact exist. I haven't bought a game from a major publisher since... uhh... well, I guess I bought Portal for $1 last year, does Valve still count as a major publisher?

As a counterpoint to most of the cynicism here, this is how the company I now work for formed. Caveats include: the founder had a lot of money because he had previously worked for a big name Internet company when it was a startup, and we spend almost all of our time as contractors for other studios rather than developing in-house IP.

it takes time for a company to become profitable. the intentionally make sure to pay us so little we never have any run out

Tryin'! I gotta put out a tabletop RPG first. Smaller market, plus I need to finish the rule set to use it in my games!

What I’m reading is that it’s a quick way to lower expenses and pad the investors’ pockets, flooding the market with developers and reducing their value, to then hire them back a few months later at lower salaries.

That sounds like what I see people comment on Lemmy. Those opinions or impressions are not necessarily true though, or seeing the full picture.

People are laid off, which makes the news. But many others remain employed, those don't make the news. Many others founded or found new companies, which don't make the news.

Creating your own company, with all its investment, management, and risk involved is much scarier, higher investment and risk, personally and professionally, than being employed. Some people are willing to take that leap, others not.

I imagine profitably in creating games is very hard. You need to grow a user base or publicity. The market is flooded with games, publishers, and developers. Only the big ones have marketing budgets big enough that the marketing makes a bigger impact on profitability than the quality and discoverability of the product. (Like CoD investing a similar amount into marketing as the product development cost. And marketing is effective - more than a good game or product.)

Either way, I don't feel I have an overview of the whole market situation, or statistics on the broader market and development people movement. But I'm sure "why don't people start their own companies" is a wrong premise. They do. Some do. We just don't see it.

The hiring back is unlikely to be the same people too. It's new people. At the cost of experience, and possibly gain on lower salaries. I'd be skeptical it's generally good long-term management though. Short-term management is popular. Lay off, you reduced costs, get more people, you increased productivity - and the cycle continues. Managers gotta manage. (/s)

The Venn diagram of game developers, who are also interested in/good at running a business has very little overlap. You need many different kinds of people to run a business, but a game developers is only one of those. In some rare cases it works out though.

Short answer: money. It's no secret devs are usually overworked and underpaid so even a large-ish group of developers from even some of the more popular companies getting murdered simply can't afford to start a business. Some of them could go the Kickstarter route but few would be successful as is the way for Kickstarter.