Today, a large number of former employees at Red5 have reported on social media that they have been laid off, including FadedPez, the(former) community manager of Firefall. The amount of employees laid off has not yet been confirmed, however it seems to be a very significant round of layoffs.
Red5 has struggled for years to make Firefall profitable. In September 2013, they laid off 10% of their workforce. Back in November of 2015, Red5 underwent an even larger round of layoffs, letting a reported 40 employees go, without severance pay. In December of 2015, they failed to meet payroll, and employees were not paid on Christmas day. There were also rumors of the parent company The9 threatening to sue employees that disclosed not being paid, however these claims have not been confirmed. The employees did end up getting paid in the end, but with a delay of several days.
When developers/publishers of online games struggle financially, it almost always turns into a downwards spiral. Restructuring with a smaller development team means less content updates, which reduces the game’s appeal and sales. In addition, layoffs create the perception that a game is dying, which reduces the appeal to either start playing the game or to spend money on it- players often don’t want to spend money on a game that they might not be able to play in a few months.