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.

These budgets are insane, lol. 

Spider-Man 1 was like $185 million (?), so the second one went up to $300 million five years later? $400 million for Starfield, estimated $435+ million for Cyberpunk 2077. 

The problem with this is the rapid increase of budgets, not even Hollywood movies scale this rapidly up. Titanic was the first Hollywood movie to cost $200 million, that was in 1997 and that took two studios to team up to co-finance it together, we didn't see $300 million until 2007 with Pirates of the Caribbean: At World's End and that was the only $300 million dollar movie for an entire decade until 2017 when Star Wars: The Last Jedi hit $300 mill and so did Justice League.

If games are going to keep going from like 180 mill to 300 mill every 4-5 years, that is a worrying trend, you can see why these studios are starting to panic and try and cut costs, MS is looking to bringing their games to competitor platforms, Sony even with a lot of PS5s sold is looking to get out of being stuck exclusively on just that platform. 

If Spider-Man 2 is $300 million, Spider-Man 3 is what? $450 million? $500 million? You can see why they are looking to jump ship. 

Exactly, those budget increases are because they are searching for the next jump in technology. In order to make a game look, feel, and play as it does on the PS5 and Xbox Series, you have to put in the time (multiple years), resources, and money. Hopefully gaming can return to 1080i 60fps soon. That's how these two companies will be able to slash their budgets, allowing more workers to keep their jobs.

Exactly, those budget increases are because they are searching for the next jump in technology. In order to make a game look, feel, and play as it does on the PS5 and Xbox Series, you have to put in the time (multiple years), resources, and money. Hopefully gaming can return to 1080i 60fps soon. That's how these two companies will be able to slash their budgets, allowing more workers to keep their jobs.

1080i? Small issue with that.

Exactly, those budget increases are because they are searching for the next jump in technology. In order to make a game look, feel, and play as it does on the PS5 and Xbox Series, you have to put in the time (multiple years), resources, and money. Hopefully gaming can return to 1080i 60fps soon. That's how these two companies will be able to slash their budgets, allowing more workers to keep their jobs.

1080i? Small issue with that.

That would take a culture shift in both developers and consumers. And well....good luck on the last one.