Video Games

A Risky Scenario for a Key Industry Player 

Authors: James Fleury & Caleb Ward

The acquisition of Warner Bros. Discovery by Paramount Skydance has widespread implications for Hollywood and the global video game industry. This section explains how the acquisition would adversely affect the Warner Bros. Games (WBG) division in terms of intellectual property (IP), labor, and industry consolidation. Despite representing the “next IP goldmine” for film and television and despite generating more revenue than the worldwide box office, video games are a volatile business. From Paramount Skydance’s risk-averse perspective, the gaming industry’s challenging nature and recent turmoil likely warrant scaling back at WBG. Its in-house development and publishing could shift to a licensing model in which third parties take on these responsibilities. At its studios, this shift could lead to divestment, layoffs, or closure. For decades, WBG has been an influential publisher and developer of games in popular franchises as diverse as Batman, Lego, and Mortal Kombat. Its loss or reduction would have significant consequences for video game workers and consumers.

The performance of two recent products illustrates the challenges WBG has faced within the video game industry in general and within Warner Bros in particular. On the one hand, Hogwarts Legacy launched in early 2023 to critical acclaim and became the year’s best-selling game in the U.S, earning $850 million in its first two weeks. On the other hand, Suicide Squad: Kill the Justice League debuted a year later to mixed reviews, lost its parent company $200 million, and led to layoffs at developer Rocksteady Studios. These examples reflect the unpredictability of the games business and the vulnerable position that WBG could find itself in under a combined Paramount-Warner Bros., as the conglomerate looks to reduce risk and cut costs.

Warner Bros. Games Has Been a Major Player and Important Driver of Growth in Gaming

If WBG were to close under Paramount Skydance, Hollywood, and the video game industry would lose a historically significant company with a reputation for innovation and quality. Warner Bros.’ involvement in the games industry dates back to 1976, when the Warner Communications conglomerate bought industry pioneer Atari. As part of a wider industry downturn, Warner Communications sold off Atari’s home console business in 1984 (but retained its arcade division until 1996). Instead of developing and publishing in-house, Warner Communications and its successor, Time Warner, collaborated with licensees. In 2004, Time Warner formed Warner Bros. Interactive Entertainment (WBIE) to oversee the development of games based on Warner IP. Early on, WBIE demonstrated a focus on quality by penalizing licensees for products that failed to meet a set threshold on review aggregation sites such as Metacritic. Over the years, WBIE expanded into developing and publishing by acquiring and establishing studios around the world (e.g., Monolith Productions in the U.S., TT Games in England, WB Games Montréal in Canada). 

Today, WBG spans 11 studios and employs at least 2,500 people (995 at WB Games in Los Angeles, 336 at TT Games’s three studios, 250 at WB Games Montréal, 244 at NetherRealm Studios, 213 at Avalanche Software, 204 at Rocksteady Studios, 199 at WB Games Boston, 46 at WB Games New York, and 19 at WB Games San Francisco). WBG owns important gaming IPs like Scribblenauts and Mortal Kombat, has collaborated with the Lego Group since 2008, and leverages Warner Bros. Discovery brands, such as DC, Game of Thrones, and Harry Potter. In addition to developing games, WBG’s publishing efforts have included partnerships with three of the biggest independent studios: Supergiant Games (e.g., Bastion), Techland (e.g., Dying Light), and IO Interactive (e.g., Hitman). The investments occurred early in these studios’ lifetimes, giving each one the essential resources to become an industry juggernaut. WBG has also supported physical media through a global publishing partnership with CD Projekt Red for The Witcher 3 and Cyberpunk 2077. 

Few companies in the industry have contributed as both developers and publishers on this scale, providing substantial contributions and funding to their teams and external studios. Moreover, Warner Bros. Discovery is one of the only legacy media conglomerates involved in both game development and publishing. Variety has described WBG as “Hollywood’s most established games company beyond Sony’s PlayStation,” given that “Warners’ studio contemporaries are merely licensors.” Other Hollywood companies (e.g., Bad Robot, Blumhouse, Lionsgate) and tech giants (e.g., Amazon, Apple, Netflix) have had more mixed results with video games.

Under Paramount Skydance, Warner Bros. Games May Cease to be a Creative Leader 

Video games not only generate new IP (e.g., HBO’s The Last of Us) but also help existing franchises expand (e.g., WBG’s Lego Batman: Legacy of the Dark Knight). Warner Bros. Discovery has used games to reach established fans and new audiences alike. This is evident in former WBG president David Hadad’s insistence that games are crucial for “keeping our franchises relevant, resonant and exciting” and in DC Studios co-chairman and co-CEO James Gunn’s stated intention to produce games that “intertwine” with DC’s shared universe. Whereas Warner Bros. Discovery has demonstrated that video games can occupy a central position within cross-media franchises, Paramount Skydance has treated them as more ancillary; the company “does not break out revenue from its gaming unit, which is lumped in with the Filmed Entertainment division’s ‘licensing and other’ category”). Under Paramount Skydance, then, WBG stands to become more of a secondary revenue stream and less of a meaningful creative force capable of supporting multiple sectors of the conglomerate. 

While Paramount Skydance has invested in adapting games for film and TV (e.g., Sonic the Hedgehog), it has favored licensing arrangements for franchises such as Paw Patrol, Star Trek, and Teenage Mutant Ninja Turtles. Compared with maintaining in-house operations, licensing reduces costs and allows for greater variety but also requires sharing profits and having less control. Although chairman and CEO David Ellison has called video games a “core creative engine,” his company has been a minor player in the industry. Skydance Interactive has focused on virtual reality (e.g., Skydance’s Behemoth) and Skydance New Media—despite opening in 2019—has yet to release its first product, which is slated to be Marvel 1943: Rise of Hydra. In June 2026, Paramount Skydance announced the formation of Paramount Games Studio, which brings together Skydance Interactive and Skydance New Media. 

New Business Models and Development Turmoil

WBG would fall victim to layoffs and studio closures if Paramount Skydance embraces licensing or subsumes it under the newly formed Paramount Game Studios. 

On the one hand, Warner Bros. Discovery has shown an openness to licensing across mobile games (e.g., Zynga’s Harry Potter: Puzzles & Spells), console titles (e.g., Gamemill Entertainment’s Looney Tunes: Wacky World of Sports), and limited-time promotions within live-service platforms (e.g., Roblox and Fortnite). On the other hand, Warner Bros. Discovery has also continued to operate its own publishing and development even while collaborating with licensees. However, Paramount Skydance’s cost-cutting efforts could mean greater reliance on licensing and a shift away from WBG’s legacy of critically acclaimed games published and developed in-house. This would exacerbate WBG’s already-significant downsizing, which—since 2025—has included changing leadership, consolidating to four core franchises (DC, Game of Thrones, Harry Potter, and Mortal Kombat), laying off hundreds of employees at Rocksteady Studios and WB Games Montréal, and closing three studios that employed over 250 people (Monolith Productions, Player First Games, WB Games San Diego). 

Moreover, the decision to form Paramount Game Studios while Paramount Skydance’s acquisition of Warner Bros. Discovery is pending suggests a planned takeover in which WBG would be subsumed rather than be retained as a separate entity. Because the scope of Paramount Skydance’s gaming division is much smaller at present, WBG would need to be significantly scaled down to integrate into Paramount Game Studios.

The Deal is a Losing Game for Workers

The acquisition of Warner Bros. Discovery presents an uncertain future for WBG. The division had already been rumored for sale for years. Volatility across the video game industry leaves WBG particularly vulnerable. Despite record global revenues of $195 billion in 2025, the industry lost over 9,000 jobs that year, bringing the sector total to more than 45,000 layoffs since 2022. 

Industry consolidation has been a major driver of layoffs. In 2023, Microsoft spent $75.4 billion to acquire Activision Blizzard, which itself was the result of a 2008 merger. This acquisition was followed by studio closures and thousands of job cuts at Xbox in 2024 and 2025, continuing into 2026. Similarly, since 2020, Embracer Group has acquired dozens of studios (e.g., Gearbox and Eidos Montreal) and notable IPs (e.g., The Lord of the Rings and Tomb Raider). Yet, in that time frame, Embracer has also shut down studios, laid off more than 4,500 employees, and divested amid financial failure. According to precedent, large acquisitions tend to be followed by dramatic layoffs. 

Should the merger be approved, WBG is likely to be reduced in size at the very least. Even a 10% cut to its 2,500-person workforce would result in the loss of 250 jobs. These layoffs would be felt across studios in a range of locales—including Canada and the United Kingdom, as well as California, Illinois, Massachusetts, and New York. The state of the industry means that reductions in WBG would have significant ramifications for developers around the world, intensifying the already tumultuous competition in the job market. WBG’s publishing arm is likely to be dismantled entirely, accelerating industry consolidation. By reducing the number of publishers, the loss of WBG would limit developers’ opportunities to secure the funding and support they need to succeed.

However, layoffs alone do not address development risks. Paramount Skydance may find more value in selling studios and licensing Warner Bros. Discovery IP to external parties. Potential buyers would likely be powerful, established players—including EA (owned by Saudi Arabia’s Public Investment Fund) and Tencent (based in China and the world’s most powerful video game company). Politicians have already warned about Saudi Arabian and Chinese investment in the proposed deal, as these countries seek to expand their global influence through media-industry ownership. Their soft power would grow if EA or Tencent acquired WBG’s assets.

Ultimately, the fate of WBG would be felt most deeply by workers. The game industry is already facing enormous layoffs. With fewer studios and an influx of desperate workers, the employment situation would only worsen. Moreover, the intense competition for jobs reinforces studios’ ability to overwork employees, reject unionization, and perpetuate hostile working environments globally.