Avalanche Studios has confirmed that it is preparing to lay off 77 of its 160 staff due to losing two publishing contracts this year, worth around USD 34 million (EUR 27.2 million).
The studio is currently in negotiations with unions to let the staff go after informing employees of the decision last week.
"We have given notice that it's our intention to lay off 77 people," said CEO Christofer Sundberg, speaking to GamesIndustry.biz.
"We have lost two publisher deals this year – those deals were worth around USD 34 million," he revealed.
"We lost the first deal in February but we could survive that one because we had a shortage of staff in other projects and we decided to put together a team to work on a original IP that we had in development. But the team that were working on a project that was terminated last week – there were about 67 people on that team."
The company operates a policy of last in, first out, meaning staff working across the company will be made redundant, not just those working on the cancelled titles.
Sundberg said that now "there's a stronger focus more than ever," on the development of Just Cause 2 for Eidos, as well as the recently revealed project The Hunter, with Emote Games.
He also added that the studio "has started some discussions with different publishers about a new project and those discussions are going very well."
Sundberg said that he wasn't comfortable with the size of the studio, and he anticipates that the business will not grow too large in future, preferring to concentrate on a small handful of projects.
"I'm very positive that we'll get back on our feet again. But will we become a 160 employee studio again? I'm not sure.
"It just sort of became that way. I love working with these people but I hate growing because it becomes very industrialised and very impersonal. We started this company based on a passion to create games, not to run a huge business," detailed Sundberg. "Our focus is on original IP which we've done well with, but the industry is focused on licenses and sequels."
"We will become a two project studio on top of The Hunter, which is a different project with a smaller team. We definitely won't take on more than two projects," he added.