Here’s Why Microsoft Closed Tango Gameworks, When Japan Has Been Avoiding Video Game Layoffs

About three months ago, we reported on an interview with Dr. Serkan Toto explaining why video game companies in Japan were not laying off their employees, and actually giving them salary raises instead. A new interview with GamesIndustry.Biz got Dr. Toto to elaborate further.

For those who don’t know, Dr. Toto heads an independent game consultancy in Japan called Kantan Games. In this capacity, he does the research on the Japanese video game industry, selling his work to the finance industry as well as global game companies. In plain English, he is as good an expert on the Japan game industry as you can find.

In our original report, Dr. Toto explained that Japan’s domestic game market is robust, to the degree that the game companies are raising salaries to retain their developers. But Toto wasn’t able to talk about the case of Tango Gameworks.

Tango Gameworks was founded by Shinji Mikami, as a wholly Japan owned company. However, due to financial issues, Mikami sought the assistance of Bethesda Softworks, who arranged for their parent company Zenimax to acquire the studio, shortly after its founding in 2010.

Tango under Zenimax produced The Evil Within 1 & 2 and Ghostwire Tokyo. In 2021, Zenimax itself was acquired by Microsoft, and it was under Microsoft that Tango released Hi-Fi Rush. As we all know, a little over a year after Hi-Fi Rush‘s release, Microsoft chose to shut down Tango Gameworks.

So the key question comes up; how could Microsoft justify this shut down of a Japanese game company, when the Japanese game industry was thriving? Furthermore, how could this happen when, as many gamers vaguely knew, there were some laws and protections for salarymen in Japan?

Dr. Toto explained the situation with Japanese law protecting employers:

“It’s almost night and day. In Japan, the law protects the employee. In the US, the law protects the company. For Europeans, it’s somewhere in the middle. It’s not as easy [in Europe compared to] the US to fire people, but it’s also not as easy as in Japan to keep your job once you have it as a full time employee.”

And then, here’s the explanation for why Microsoft shut down Tango the way they did:

“A closure where you lay off people through that method is different than going in and [cutting] that same amount of people and ten people stay. You have to explain yourself in court, because there will be lawsuits and that’s a very difficult case to make as a company.

But if you close the entire company outright, get rid of everything inside the company including the staff, office, the rent, the equipment, it’s a different story.”

So, as Dr. Toto has explained it, Japan’s laws aren’t able to protect Japanese workers in every conceivable situation. But, if you may remember, Microsoft also laid off their American workers, and the CWA cited that Microsoft honored their agreement by keeping all the workers who were unionized with the CWA.

So the truth is, such loopholes exist around protections for workers in the US, Japan, and the rest of the world too. For all the discourse that Japanese game companies like Nintendo are not ‘angels’, it’s also not true that Japanese workers are really that protected. Perhaps it would really be a fair assessment to point out that it’s the healthy domestic game business in Japan that’s made Japanese developers more secure, for now.

There are other nuances in the situation of the Japanese game industry as well. For even more insights from Dr. Toto, we once again defer to his interview with GamesIndustry.Biz here.