I believe he's saying that in the past, engineers would take a lower salary and work longer hours due to the prestige of working in the industry, or on a specific game. If they made those sacrifices and the game never even shipped, it would be disheartening. Though to a contractor, all billable hours are created equal.
I work in the games industry.
If a contractor works 80 hours a week, they can bill for 80 hours a week. If an employee works unpaid overtime then at least part of it is in hopes for a nice bonus once the game comes out(apart from you know, the satisfaction of working on a game). So in that way, an employee can do loads of extra work and if the game tanks they won't see any extra money.
Depending on the size of the studio, you very well could be out of a job if a major release tanks. As a contractor, this assumption is accounted for and built in.
This depends on the company. Where I work now we do get paid for overtime, but we have to organise it with our managers and producers first, and it has to be for a good reason. At the moment we are not in "crunch" so we only do overtime if we think we need to.
You're incredibly lucky. From everything I've seen and heard this policy is very much the exception, although I hope that changes in the future.
I really like a policy that gives management and employees aligned incentives; it puts everyone on the same team and makes sure people value the other side's perspective.
