Is the hire-layoff-hire trend for Developers a good idea?

Article talks about game developers how they are hired for a game, once the game is done, the lay-offs start (regardless of if the game was successful or not).  I found the article interesting because this trend is not limited to the gaming industry.  It seems in the past 10 years its more common to have “contract” engineers and developers than to have full-time folks loyal to the company.  Problem is that those “folks” are your knowledge and experience you will need in the future, and if they are not loyal to you, why would they come back or go the extra mile when you need them.  The other trend I see (not in article) is these folks are earning less and have no/little benefits compared to the 1990’s.

http://www.wired.com/gamelife/2012/10/lionhead-layoffs/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wired%2Findex+%28Wired%3A+Top+Stories%29