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Most studios hire a large number of artists as they ramp up work on a title (and later lay them off after release), so assets aren't really an issue. It's just part of the ebb and flow.
In my experience, you never really have too much man-power for the task at hand, and the period of time leading up to a launch is insanely busy for everyone. After cuts, yes you will start to see smaller teams oveburdened sometimes, but that's just the nature of things, and will even itself out in the long run as work on another project ramps up.
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