Tech
The Gaming Industry Hits a Wall: A Shift in Strategy
For the last 30 years, since games became mainstream entertainment, the largest publishers have followed a simple pattern: create a game, and if it succeeds, turn it into a series. Each new installment needed to be bigger than the last, graphically more advanced, and offer more content. For a while, this was relatively simple and affordable, thanks to rapid technological progress.
Smaller productions existed, but were generally ignored by industry giants, with publishing handled by smaller entities or self-publishing. Today, the landscape largely remains the same: companies specializing in AAA (high-budget) and AA (mid-budget) titles coexist with smaller teams operating with lower costs.
Billions That Have Evaporated
The industry has reached a point where AAA title development now takes at least 3-4 years, and in some cases closer to 7-8 years. Previously, with development cycles of a year or two, companies could anticipate a return on investment within a reasonable timeframe. Even if a title underperformed, the shorter development meant losses weren’t as substantial. Today, with games taking over half a decade to create, companies spend years without revenue, and the risk of financial failure hasn’t diminished. A larger budget doesn’t automatically guarantee success, as demonstrated by recent financial failures like Skull and Bones (Ubisoft), Concord (Sony Interactive Entertainment), FBC: Firebreak (Remedy), and Suicide Squad: Kill the Justice League (Warner Bros). These games absorbed hundreds of millions of dollars and failed to recoup even half their costs.
With growing competition – over 20,000 games debut each year – convincing consumers to make a purchase is increasingly tricky, especially during the initial, most profitable period when games are full price.
making games, especially high-budget ones, has become a highly risky investment. What worked for years and seemed resistant to crises is now facing unprecedented challenges. Major publishers are responding in ways that once seemed counterintuitive: they’re reducing the scale of their projects and diversifying them, choosing a safer, less lucrative path instead of betting everything on a single “golden shot.”
Giants are Focusing on Smaller Projects
While some titans are positioned for success and can afford long gaps between releases, most publishers have begun to prioritize lower-budget productions. Previously, their most popular brands were automatically associated with the large budgets typical of AAA titles and games offering dozens of hours of gameplay. While spin-offs have existed for some time, they were less common. Now, that’s changing.
PlayStation studio Santa Monica recently released God of War: Sons of Sparta, a graphically simple, 2D title in the world of the God of War series, which has earned nearly $1.5 billion in the last 7 years. The project involved Mega Cat Studios, a relatively unknown team. Konami recently revealed Castlevania: Belmont’s Curse, the first full installment of the series in years, after Netflix acquired the rights to a serial adaptation.
Crystal Dynamics, currently working on new Tomb Raider installments, is revisiting another formerly popular franchise, Legacy of Kain: Ascendance. Again, instead of large-scale projects that previously failed to materialize, they’re opting for a simpler, graphically less demanding 2D game.
Blizzard, now part of Microsoft, unexpectedly released an addition to the classic Diablo 2. Adding new content to a 27-year-old game is unusual, but it was considered the least risky way to generate additional revenue from the well-known series. Adding a few changes and a new class likely generated a return on investment within the first 24 hours of release.
Less May Mean More Security
Alongside this trend, the gaming industry is experiencing a wave of remakes and remasters, renewing older, proven games. This is another low-cost, low-risk investment that has helped the market during a difficult period. Numerous such projects are already in development, including a remake of the original Witcher, a renewed God of War trilogy, Assassin’s Creed 4: Black Flag, Splinter Cell, the first Silent Hill, and the original Tomb Raider.
All these projects – both refreshed titles and new, simpler productions – share one thing in common: they are inexpensive to produce. Budgets can still be in the millions, but are significantly lower than previous costs. While potential sales may be slightly lower, achieving a positive ROI is much easier with these investments.
Moving away from this rigid scheme focused solely on exponential growth with each new project too allows for greater creativity in game development. When the stakes aren’t as high and you’re focusing on a niche audience, you have more room for experimentation and unconventional solutions. These are often the foundation of the best-received games in recent years, typically created by slight, independent studios rather than the largest producers and publishers.
The gaming industry, recovering from a recent crisis, may emerge stronger as a result… although another threat looms on the horizon that could fundamentally change the market and how games are made.
