AMZN Amazon.com Inc

By Sarah E. Needleman 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (June 18, 2019).

Amazon.com Inc.'s yearslong effort to invade the $130 billion videogame industry is hitting a rough patch.

The company last week laid off several dozen employees from its division that develops videogames, according to people familiar with the matter. The layoffs come as Amazon has struggled to produce a hit and make inroads with internal software it hoped would lead more game developers into becoming customers of its cloud service, Amazon Web Services.

An Amazon spokesman declined to specify exactly how many jobs it eliminated. In a statement, the company said it is reorganizing to focus on two games under development and new projects, and would assist the affected employees in finding jobs within Amazon. Videogames publication Kotaku earlier reported on the layoffs.

Amazon's troubles in videogame creation show how even one of the world's biggest companies can struggle to break into different markets. The online retail giant causes concern among companies in other industries when it moves into their businesses. Amazon has become a leader in cloud computing, a major Hollywood studio and is emerging as a threat in advertising, logistics and health care.

It has had its missteps, too. Earlier in the week, Amazon said it would shut down its restaurant delivery service after it failed to gain traction. Its attempt at selling its own smartphone failed several years ago.

Amazon's overall push into videogames isn't a bust. The company in 2014 purchased for $980 million Twitch Interactive Inc., a live-streaming platform beloved by gamers. Last year, people spent 505 billion hours watching live-streams on Twitch, up from 355 billion in 2017, according to its own data. Wedbush analyst Michael Pachter estimates Twitch made $400 million in revenue last year, double from the year Amazon purchased it.

Amazon's videogame woes have mostly stemmed from its Amazon Game Studios unit, which the company formed in 2012 and today has roughly 800 employees across three studios in Seattle, San Diego and Irvine, Calif.

Amazon Game Studios initially focused on publishing other developers' mobile games, but in 2015 it switched to developing its own titles for personal computers. The unit announced in 2016 that it had three significant PC games under way. Since then, one has been canceled, while the other two remain under development.

"In spite of our efforts, we didn't achieve the breakthrough that made the game what we all hoped it could be," Amazon staff wrote in a Reddit post last year revealing the cancellation of "Breakaway," one of the three PC games it announced. The company had described it as an online multiplayer "mythological sports brawler."

One additional PC game was never announced publicly but has been canceled, according to people familiar with the matter. Amazon Game Studios last year released a car-racing title called "Grand Tour Game" for consoles, but it has sold poorly.

To aid its efforts, Amazon recruited several industry heavyweights over the years, including former Sony Corp. executive John Smedley and game designers Kim Swift and Clint Hocking. Mr. Smedley still works for the company, but Ms. Swift and Mr. Hocking left years ago.

Like Hollywood movies, videogames can take years to make, and it isn't unusual for some to get scrubbed upon receiving harsh feedback from testers. The game-creation business is so competitive that success in it can be elusive even for a cash-rich company like Amazon.

The usual game-industry headwinds aren't entirely to blame for Amazon's challenges, according to current and former employees. Amazon sought to build powerful games off software it acquired in 2016, with the goal of enticing more game makers to use its cloud servers to host their wares online.

The software, a so-called engine known as Lumberyard, wasn't built for the kind of multiplayer games Amazon wanted to make, and the company's efforts to retool it have proved difficult, the current and former employees said. As a result, making "Breakaway," for example, was like driving a train while the tracks were still being laid down, these people explained.

"They're still ironing out the kinks of what it means to own and maintain your own engine," said a developer working at Amazon Game Studios, referring to a separate team responsible for Lumberyard.

Game engines represent a little known but critically important part of the industry. While major publishers such as Electronic Arts Inc. have proprietary game-creation software, scores of developers rely on commercial engines from companies such as "Fortnite" maker Epic Games Inc. and Unity Technologies Inc.

Amazon's Lumberyard, which is free for developers, has yet to reel in a true blockbuster.

Amazon may soon allow its game studios to use other company's engines, according to people familiar with the matter. That could potentially propel the development of its games, but also require Amazon to pay a subscription fee or royalty on sales.

Other tech giants are attempting to break into game development. Google said in March that it was building a game studio to be led by Jade Raymond, known for her work on Ubisoft Entertainment SA's "Assassin's Creed" franchise. The Alphabet Inc. unit also is planning to launch a Netflix-like streaming service for videogames called Stadia in November, a move that some analysts expect Amazon to jump into as well.

--Dana Mattioli contributed to this article.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

(END) Dow Jones Newswires

June 18, 2019 02:47 ET (06:47 GMT)

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