"We studied our business and determined that we could operate with a smaller team while continuing to provide the same high level of service to our customers," said Hodess in a prepared statement provided to Joystiq. "Aside from a greater focus in our software development efforts, we're not making any significant changes in our console subscription or digital download businesses. GameFly remains profitable with a strong balance sheet."
The company did not mention the extent of the layoffs, but sources tell us it was 35 employees in total, with another mentioning it was a third of the Los Angeles-based company's staff. Much like GameStop's used games business, a digitally distributed future of one-time-use watermarked games isn't likely to be kind to the by-mail rental service. The fact that GameFly also owns Direct2Drive (now GF Digital) may soften the blow.
Update: "The layoffs represented approximately 15 percent of [GameFly] staff," a spokesperson for the company informs Joystiq.