It's just a sign of the state of the economy. If there was less worry that you were going to have no problem making your money back on a game, with a massive profit, you'd be more likely to hire full-time permanent people, because you wouldn't view the person as a risk, you'd view them as a reliable, long-term asset. If sales are fickle, players quickly forget about your game and move on, and you don't know if your next game is going to be profitable or not, why *would* every hire you make be full-time and permanent?
Game development is cyclical, the entire production cycle of a game doesn't always require the same number of staff, so if you don't have anything else for part of the staff to work on in pre or post production, then you'd have to lay off some of your permanent staff. If you gained the reputation of always laying off 20% or something of your staff every time you shipped a large game, you'd hurt your company's reputation, and you'd also limit your ability to hire good people, because how many people are going to join a company that has a reputation for letting full-time employees go every two or three years?
It's much easier to simply ramp up when needed with contract employees, because when you no longer need a certain number of people, the contract expires, and no one is laid off, they simply find other work, or they take contractual work elsewhere.
Sometimes contract employees get hired into a full-time position, it happens all the time. As stated in the article. It's not all bad.
There's also the issue of giant, mega-publishers vs small publishers/developers, and indie developers. Nintendo, Sony, and MGS for instance employ thousands of full-time developers on a permanent basis. At any given time, there are a dozen or so major projects at varying levels of development. If one large project is finished, then you move some of the staff over to other projects, to get those other projects finished. Not every company has those resources. If you're a tiny developer with two projects, and they both finish within six months of each other, it may be another year or so before you need all 75 staff again. In a case like that, it is perfectly reasonable that you would have a portion of your staff be contracted employees, because they know and you know, that you only need the maximum number of staff when a game reaches a certain level of production.
