The AAA Games industry is falling apart – but there are some silver linings.

Over the last year, major game developers and publishers have laid off thousands of their employees as a short-term Band-Aid to their ailing profits. In just the last few months, a massive number of employees were let go from Microsoft, Electronic Arts, and several Playstation-owned studios like Firesprite and Spider-Man devs Insomniac. Why is this? While layoffs are the standard tech bro answer to any major issue involving profits during the creation of art, there is another much larger issue that is the root cause. Games are just too big now. While this ongoing crash among industry giants is devastating in terms of the human cost, there is a bit of a silver lining. After all, these companies are discovering that they can’t hold all the cards *and* still profit.

An Unsustainable Model

So, why is this crash happening? Over the last decade or so, as technical expectations from gamers have risen, major AAA game releases have been ballooning in production costs. Rockstar Entertainment’s last two games helped set that insane precedent, with Grand Theft Auto V costing $265 million and 2018’s Red Dead Redemption 2 ending up at an absurd $540 million. Just last year, Insomniac’s much beloved Marvel’s Spider-Man 2 ended up costing $300 million by the time of release. These costs are pretty much considered normal for the biggest game releases from major developers and publishers. As mainstream gamers demand higher fidelity and more “content,” and publishers like Sony and EA want their games to appear as prestigious as possible, contemporary blockbuster games have become unsustainably expensive to make. “But wait,” you may argue, “Rockstar games and Sony’s big first person titles sell really well, right?” Well, yes, they do. Spider-Man 2 sold some 10 million copies. Star Wars Jedi: Survivor, developed by recent layoff victim Respawn Entertainment, was also a huge sales success and one of the highest selling games of 2023. The problem is that these games often take *years* just to break even, let alone see actual profit – and some games never even do that. This doesn’t do for major corporations obsessed with instant success and infinite growth. Their immediate solution then? Maybe cut the pay of the company’s top earners and redirect talent in a new direction? Of course not. Mass layoffs are the ultimate immediate cost-saver in the upper echelons of business. Obviously, this never solves anything and actually creates a whole new set of problems for devs and publishers.

An added struggle to development times and consistent game quality comes from a lack of veteran personnel at developers, thanks to mandated layoffs. Companies are so obsessed with “short term gain, long term loss” strategies that they force their own devs into desperate situations. When devs who are experienced in a specific setting and working with a specific game engine, they’re obviously able to work more efficiently and troubleshoot issues that may pop up. What has been happening more and more often now is that experienced devs are being laid off and replaced at regular intervals by freelance labor – many of whom may have no experience with a certain studio’s in-house software. Not only is this frustrating for the developers themselves, it’s creating quality and timeline issues for the publishers themselves. In order for games to be made and made well, you need experienced hands at the helm to both direct a project and train newer talent – not rely on rotating freelance labor for the sake of *maybe* saving a few bucks.

The Silver Lining

Through all the callousness of the current AAA games industry situation, there is a little bit of a silver lining in these corporations and publishers losing control of the ball. In the fallout of major publishers bleeding money, some developers have managed to wrench themselves free from their ownership. In the past month, Star Control and Skylanders developer Toys for Bob left Activision to go indie. Shortly after, Saber Interactive, best known for their upcoming Star Wars: Knights of the Old Republic remake, broke free of Embracer Group. As publishers dig for ways to save money, they appear to be more willing to let go of entire studios – or sometimes, at least trademarks. Alan Wake and Max Payne developers Remedy Entertainment actually got the rights to their 2019 cerebral action game Control away from publisher 505 Games. In even more surprising news, legendary RPG developers FromSoftware got complete ownership of the massively acclaimed and successful Elden Ring from publisher Bandai Namco. The Dark Souls and Tekken publisher reported considerable losses at the end of 2023, making it easier for FromSoft to pull the rights to their game for themselves. For the fortunate studios who have managed to keep their teams and internal structure, there seems to be a growing path to freedom born out of publisher incompetence.

This next bit is going to be all speculation on my part, but bear with me. The need of AAA studios to spend less and have greater profit margins, combined with developers slowly gaining independence from their shareholder captors, there could potentially be a return to an older era of game releases. The sixth generation consoles – PlayStation 2, the Nintendo Gamecube, the original Xbox, and, to a lesser extent, Sega’s Dreamcast – played host to an incredible variety of titles from both rising and already dominant studios. The era of gaming as mainstream entertainment was brand new, with fully rendered 3D graphics now in their 2nd generation on new consoles. As such, original ideas and experimentation were still at an all-time high. Publishers were throwing whatever devs could come up with at the wall just to see what would stick. New titles came out in rapid fire pace, since even big budget games didn’t take nearly as long nor cost nearly as much to make then as they do now. In an era where we’re only getting one main series Grand Theft Auto title per generation, the sixth generation had *three.* Even major AAA efforts didn’t take anywhere near financial or personal toll for the developers that they do now. Also, because of the sort of newness and freedom of 3D gaming technology, games could often focus on being cleverly designed and just *fun* instead of prestigious or technically masterful. This was the era of Sly Cooper, Jak and Daxter, Psychonauts, and so many other fantastic titles that bring back fond memories for thousands of players who were around for this generation. Now, Microsoft has been much better about giving smaller, more creative titles a home and giving them an audience (Gamepass is a godsend). PlayStation, who is host to the most brutal round of layoffs of the year so far, couldn’t be bothered about the old titles that put them where they are now. Hopefully with longtime CEO Jim Ryan out of the picture (the man who arguably put Sony in the precarious position they’re in now), PlayStation can potentially un-cancel some projects and reignite some old flames to go back in a direction that focuses on games being fun first, technically impressive second.

I’m not at all saying that the industry will just suddenly go back to the way it was 20 years ago. The shape of game development and the market are wildly different in the wake of online marketplaces and live service titles. Some studios, in a desperate bid for more infinite profit, have elected to reduce their efforts on story-focused single player titles to allocate resources towards potentially money-generating live service games. Fortnite became an impossibly profitable giant, now everyone wants a piece. Most of the serious creativity and ingenuity we’re seeing right now is coming from indie developers, and since more studios appear to be escaping their megacorp bonds, it’s possible that we’ll see a resurgence of more classically-minded titles in the near future. Again, this is purely speculation, as there is a lot of debris and damage to get through before any noticeable changes will happen.

I want to end by noting that, even though there is some hope in the industry turning away from the untenable path it has been on, there is still no undoing the damage that has been done. Thousands of talented and passionate developers have lost their jobs and had years of work scrubbed away at the whim of shareholders – all for the sake of a line going up on a graph somewhere. In order for the games industry – and really any artistic industry – to succeed in this era, control needs to be given primarily back to the creators themselves.