Reality, Console Industry has become Stagnated.

[Shtinamin_]

When OP talks about lay offs. Those are the norm. Companies hire you to make a game and after the game is released you get fired. But seeing as how so many gaming companies are laying off around the same time, it does seems fishy. My original thought is the economy. The economy has been rather rough for a couple of years. Companies put in so much effort and time into a game that needs to have the best of the best of the best, which is time consuming, energy exhausting, and money dumping. I want to point to the Big 3, as they are called, Sony, Microsoft, and Nintendo.

Sony spent $315M as their budget for Spider-Man 2 and was developed in 3 years. Selling over 10M units.

Microsoft spent $400M as their budget for Starfield and was developed in 8 years. Selling over 12M units.
Halo Infinite had $500M budget over 4 years, selling over 20M units

Nintendo doesnt spill the beans often but they did say that they had "ample budget", with "no deadline" for Super Mario Bros Wonder and was developed in 4 years. Selling over 11.96M units.
Tears of the Kingdom had $120M budget over 6 years, selling 20.28M units.

The problems are:

• Too high of a budget
  • Quality of Graphics
  • Rendering
  • Developer Costs
  • Advertising
  • Technology
  • Higher wages
• Not selling product
  • wrong demographic
  • poor quality (bugs, glitches, etc)
  • no franchise to back it up
  • No innovation
  • Not fun

Companies like Sony and Microsoft have an extra hurdle to climb compared to Nintendo. They went with the next-cutting edge technology route. They've decided that all their games must look real, and must be the most technologically advanced game of all time. That requires so much of them. They have to make sure the game has 120 fps 4k-8k, looks like a cinema, and plays fluidly. Nintendo on the other hand has decided to opt for the innovation route. Create consoles thats have aspects that aren't explored and make it fun. Graphics will naturally come with time. Hence why their AAA 1st party game budgets are 3x smaller than most of the AAA 1st party budgets. 

Sony and Microsoft are way bigger than their gaming identities.

Sony has TV, Speakers, Photography, Cinema, Music, Finance, Gaming, etc.

Microsoft has Computers, Websites, gaming, and entering cinema.

Nintendo has Gaming, Toys, Cinema.

Nintendo is once again leading and carrying the gaming industry.