In a significant development for the gaming industry, Riot Games, a subsidiary of Tencent Holdings, announced plans to lay off 530 employees, constituting about 11% of its global staff. This decision was communicated through a blog post featuring a letter from Riot Games CEO Dylan Jadeja addressed to the affected employees.

Based in Los Angeles, Riot Games is renowned for its popular titles like "League of Legends." The company clarified that the layoffs would predominantly impact teams not directly involved in game development, aligning with a strategic focus on its core gaming portfolio.

The digital gaming sector is currently grappling with challenges stemming from consumer reluctance to invest in expensive titles and a tendency to stick to fewer games due to economic uncertainties and high inflation. This industry trend was evident last year when Electronic Arts Inc downsized its workforce by 6% and reduced office spaces.

Jadeja, in his letter to employees, acknowledged the need for a sharper organizational focus, citing the company's engagement in too many ventures. He explained that some of Riot Games' substantial investments had not yielded the expected returns, leading to unsustainable costs.

The restructuring aims to streamline operations and refocus Riot Games on its live games portfolio, including popular titles like "League of Legends," "Valorant," "Teamfight Tactics," and "Wild Rift." In a separate blog post authored by Jadeja and co-founder Marc Merrill, the company revealed plans to halt new game development under the "Riot Forge" initiative and implement reductions in staff and features for "Legends of Runeterra."

Tencent, having acquired a majority stake in Riot Games in 2011, also holds interests in prominent U.S. video game developer Epic Games. This move is seen as part of Riot Games' strategy to realign its resources and concentrate on core gaming offerings in response to industry challenges and shifting market dynamics.