Video Games

“Crunch”ing the Numbers Behind A Marquee Year in Video Games

Ellie Soskin, MJLST Staffer

The COVID-19 pandemic has made this past year a financially devastating one for film and for sports, industries that rely on in-person ticket sales for a share of their revenue. But while those industries struggled, another form of entertainment was having a banner year. The videogame industry saw revenues reach a whopping $180 billion USD, by one estimate. As of last year, more than 214 million people in the United States alone reported playing some form of videogame for at least one hour per week. Four of five U.S. consumers reported playing a video game in the last six months. And with pandemic restrictions limiting activities, gaming on dedicated game consoles, on computers, and on smartphones (“mobile gaming”) has skyrocketed. For many, online gaming has provided a social outlet during a period of isolation, or an almost therapeutic form of escapism. But for all of the potential in the videogame industry, both economic and otherwise, there is a looming labor (and moral) issue that has escaped the law.

The Washington Post recently published a piece on the legality of what’s known in the gaming industry as “crunch.” Generally, crunch, short for “crunch time” occurs at the end of a game’s development cycle. As deadlines loom, the hours become longer and longer and every day becomes a workday; thirteen hour days and seven day workweeks are not remotely unheard of. Ultimately, though, crunch can occur any time there is a major development milestone looming, not just the end of a project.

This is not a new problem, with reports of crunch at major game developers and publishers like Electronic Arts (EA) dating back seventeen years. Back then, video game revenue sat at a relatively miniscule $7 billion annually, a mere 3 percent of where it is today. That explosion in revenue has not changed employment habits. As the Washington Post reports, a 2019 survey revealed that “40 percent of game developers reported working crunch time at least once over the course of the previous year,” with many working “at least 20 extra hours” per workweek and only 8 percent reporting overtime pay. The reports have been consistent over the years: one developer reported working “14 hours a day, six days a week” during a crunch period in 2016. In 2018, employees at major game development studio Rockstar reported an average of 60-hour weeks during crunch (generally six days of ten hour workdays); Rockstar co-founder Dan Houser described “100-hour weeks.” Those kinds of working conditions are a breeding ground for prolonged stress and fatigue, causing mental health issues and even actual physical illness.

News outlets have generally framed crunch as an industry problem without mind for the legal analysis. Publishers demand last minute changes, and studio heads push workers into crunch to appease their financial backers. Or it’s viewed as a rite of passage within the industry and just part of working what is a dream job for a number of young people. In the words of one employee, “[e]mployers know that it’s many people’s dream to be there, so they are able to exploit the fact.” Take This is a mental health non-profit focused on the gaming industry that published a white paper in 2019 reporting on the most pressing mental health issues faced by game developers. Career instability, particularly crunch and lack of job security, were found to be key drivers of poor mental health in developers. Additionally, developers report working for an average of 2.2 employers over a five year period, indicative of the low stability afforded by the industry.

The Washington Post’s piece is admittedly one of the first to focus on the legal framework enabling this kind of employment behavior in the United States. In sum, the video game industry has either exploited existing overtime exemptions for salaried employees under the FLSA and state law or lobbied for new exemptions. For example, after that aforementioned EA crunch exposé, employees sued and settled multiple multi-million dollar class action lawsuits over working conditions. The settlements would have limited the exemptions and reclassified certain employees as overtime eligible, had a new set of exemption rules not been enacted in 2008, lowering the point at which salaried employees are no longer considered eligible for overtime pay.

Crunch as a concept is not simply a United States video game industry problem. Crunch, particularly uncompensated crunch, is also a noted problem in Japanese studios, as well as in various studios worldwide. Polish video game studio CD Projekt Red (CDPR) made six-day workweeks mandatory in the weeks leading up to the highly anticipated release of their big-budget game “Cyberpunk 2077.” Notably, however, those employees all received paid overtime in accordance with Polish labor laws, as well as splitting 10% of the company’s 2020 profits amongst employees as a bonus.

Ultimately, crunch seems to be deeply embedded in the culture of the video game industry worldwide. But there’s no doubt that, as the Washington Post states, it has been enabled by the structure of current labor laws in the United States. Some industry insiders have floated unionization for developers as a potential solution to the lack of legal protections overall, particularly the lack of overtime, poor working conditions, and overall job instability. An industry survey from early 2020 indicated that, when asked if they should unionize, 54 percent of workers said yes, though only 23 percent believed that they actually would unionize. Last January, one of the biggest unions in the United States, Communications Workers of America (CWA), announced their intention to help game workers unionize. But it remains to be seen if anything will come of that and no new reports on unionization have emerged since the beginning of the COVID-19 pandemic. For now, it seems like it’s business as usual for a booming industry.

In the interest of full disclosure, this author’s brother works in the video game industry.


Robinhood Changed the Game(Stop) of Modern Day Investing but Did They Go Too Far?

Amanda Erickson, MJLST Staffer

It is likely that you have heard the video game chain, GameStop, in the news more frequently than normal. GameStop is a publicly traded company that is known for selling, trading, and purchasing gaming devices and accessories. Along with many other retailers during the COVID-19 pandemic, GameStop has been struggling. Not only did COVID-19 affect its operations, but the Internet beat the company’s outdated business model. Prior to January 2021, GameStop’s stock prices reflected the apparent new reality of gaming. In March 2015, GameStop’s closing price was around $40 a share, but at the beginning of January 2021, it was at $20 a share. With a downward trend like this, it might come as a shock to learn that on January 27, 2021, GameStop’s closing price was at $347.51 a share, with the stock briefly peaking at $483 on the following day.

This dramatic surge can be accredited to a large group of amateur traders on the Reddit forum, r/WallStreetBets, who promoted investments in the stock. This sudden surge forced large scale institutional investors, who originally bet against the stock through short positions, to buy the stock in order to hedge their positions. Short selling involves “borrowing” shares of a company, and quickly selling the borrowed shares into the market. The short seller hopes that these shares will fall in price, so that they can buy the shares back at a potentially lower price. If this happens, they can return the shares back that they “borrowed” and keep the difference as profit. The practice of short selling is controversial. Short selling can lead to stock price manipulation and can generate misinformation about a company, but it can also serve to check and balance the markets. The group on Reddit knew that short sellers had positions betting against GameStop and wanted to take advantage of these positions. This caused the stock price to soar when these short sellers had to repurchase their borrowed shares.

This historic scene intrigued many day traders to participate and place bets on GameStop, and other stocks that this Reddit group was promoting. Many chose to use Robinhood, a free online trading app, to make these trades. Robinhood introduced a radical business model in 2014 by offering consumers a platform that allowed them to trade with zero commissions, and ultimately changed the way the industry operated. That is until Robinhood issued a statement on January 28, 2021 announcing that “in light of recent volatility, we restricted transactions for certain securities,” including GameStop. Later that day, Robinhood issued another statement saying it would allow limited buying of those securities starting the next day. This came as a shock to many Robinhood users, because Robinhood’s mission is to “democratize finance for all.” These events exacerbated previous questions about the profitability model of Robinhood and ultimately left many users questioning Robinhood’s mission.

The first lawsuit was filed by a Robinhood user on January 28, 2021, alleging that Robinhood blocked its users from purchasing any of GameStop’s stock “in the midst of an unprecedented stock rise thereby depriv[ing] retail investors of the ability to invest in the open-market and manipulating the open market.” Robinhood is now facing over 30 lawsuits, with that number only rising. The chaos surrounding GameStop stock has caught lawmakers’ attention, and they are now calling for congressional action. On January 29, 2021, the Securities and Exchange Commission issued a statement informing that it is “closely monitoring and evaluating the extreme price volatility of certain stocks’ trading prices” and expressed that it will “closely review actions taken by regulated entities that may disadvantage investors.” Robinhood issued another statement on January 29, 2021, stating they did not want to stop people from buying these stocks, but that they had to take these steps to conform with their regulatory capital requirements.

The frenzy has since calmed down but left many Americans with questions surrounding the legality of Robinhood’s actions. While it may seem like Robinhood went against everything the free market has to offer, legal experts disagree, and it all boils down to the contract. The Robinhood contract states “I understand Robinhood may at any time, in its sole discretion and without prior notice to Me, prohibit or restrict My ability to trade securities.” Just how broad is that discretion, though? The issue now is if Robinhood treated some users differently than others. Columbia Law School professor, Joshua Mitts, said, “when hedge funds are going to lose from a trading suspension, they don’t face any lockup like this, any suspension, any halt at the retail level, but when retail investors find themselves locked in, they find themselves unable to exit the trade.” This protective action by Robinhood directly contradicts the language in the Robinhood contract that states that the user agrees Robinhood does not “provide investment advice in connection with this Account.” The language in this contract may seem clear separately, but when examining Robinhood’s restrictions, it leaves room to question what constitutes advice when restricting retail investors’ trades.

Robinhood’s practices are now under scrutiny by retail investors who question the priority of the company. The current lawsuits against Robinhood could potentially impact how fintech companies are able to generate profits and what federal oversight they might have moving forward. This instance of confusion between retail investors and their platform choice points to the potential weaknesses in this new form of trading. While GameStop’s stock price may have declined since January 28, the events that unfolded will likely change the guidelines of retail investing in the future.