Avalanche Studios lays off nearly half of staff

Swedish video game developer Avalanche Studios, which made 2006's Just Cause, has apparently decided to slash nearly half its staff after losing contracts for two new games.

According to GamesIndustry.biz, Avalanche said it will lay off 77 of its 160 employees after losing the contracts, which would have been worth as much as $34 million.

The company's CEO, Christofer Sundberg, told GamesIndustry.biz that it had lost the first contract in February, but had been able to weather that by moving staff around. But after the second contract was lost last week, it had nowhere to put the staff that had been working on that project.

While these layoffs are specific to Avalanche, it comes at a time when many involved in making video games have been saying that the industry is insulated against the economic downturn due to the fact that people traditionally spend money on entertainment even when times are tough. And while it's not clear if the layoffs can be tied to the financial crisis, the move certainly isn't what people in the industry want to be seeing right now.

Avalanche will now put more emphasis on creating Just Cause 2 for publisher Eidos, as well as The Hunter for Emote Games.