Chessable lays off 29 employees citing ‘new economic reality’

Are the glory days over?

Image via Pixabay

The flagship product of the Play Magnus Group is facing economic headwinds after it let go 29 employees to try and reach an economic equilibrium. It is not a good sign for the health of the online chess ecosystem in an already turbulent financial world.

A blog post authored by Chessable’s CEO went live earlier today announcing the layoffs of 29 employees of the company. The decision impacted both full-time and part-time employees. Though the decision was made on June 23 and the company’s goal of cutting costs was made clear in a May 24 investor presentation, the announcement of the layoffs happened today during a national holiday in the United States.

Chessable is part of the Play Magnus Group, the conglomerate owned and helmed by world champion Magnus Carlsen. Its most notable products include the Chess24 website, the Meltwater Champions Chess Tour online events, and the Play Magnus app. The company also owns controlling interests in two notable chess book publishers, New In Chess and Everyman Chess.

At the time of writing, LinkedIn lists 84 employees for Chessable, and a September 2021 interview by Stefan Löffler mentions a Barcelona headquarters with 35 people.

Chessable’s financial issues are a part of a larger problematic pattern in the online chess scene, with audience sizes dropping back to pre-pandemic levels and many sponsorship opportunities drying up. In February 2022, the first event of the season’s Meltwater Champions Chess Tour, the Airthings Masters 2022 tournament reached 1,303,017 hours watched, according to stats provided by EsportsCharts, while its latest edition, the Chessable Masters 2022 event in late May, clocked in at 941,283.

Play Magnus Group’s business plan: Esports and e-learning

Before we can dig into why the Play Magnus Group pivoted to laying off such a large percentage of Chessable’s employees, a quick Economics 101 primer is required. In better times, such as the pre-pandemic years, when interest rates are low, it’s relatively cheap to take out loans and play with house money.

This means investors are more willing to take risks on new companies, with the hopes one of them will turn into a profitable unicorn with high returns. To that end, promising and profitable ventures are showered with cash to keep on growing as aggressively as possible for an eventual monetary fireworks display. Short-term profitability is not a concern; the goal is to scale up to the big bucks.

Flash forward to 2022 as interest rates are skyrocketing. Suddenly, investors are a whole lot less willing to fund companies in the red for a couple of years, waiting for growth. New funding rounds are slashed, and painful decisions have to be made. The last dominoes to fall are the employees who are let go, even when there are no underlying performance issues or other work concerns involved.   

This trend is visible everywhere in the startup world, but it is further exacerbated in the online gaming scene. Many of the esports events were generously sponsored by crypto companies, which saw their market value melt away in the recent brutal correction. It’s also becoming quite clear that the “chess boom” fueled by the pandemic and Netflix’s The Queen’s Gambit mini-series has come to an end as audience views and subscription purchases are trending downwards.

The Play Magnus Group, the company behind Chessable, saw its share price drop from roughly 23 NRK to eight, and their May 24 investor presentation highlighted a necessary pivot to a “derisking path,” cutting costs as “[the] Courses segment [got] off to a slower start than anticipated.” The Q1 cuts are expected to result in approximately $2 million in annualized savings, with “further actions and savings planned for Q2 and Q3.”

The presentation still treats chess as a booming market, and with a world chess championship match coming up, this downward trend could be temporary, and the Play Magnus Group still maintains its 2025 growth targets despite this short-term downfall. Whether the company has got it right remains to be seen.