A contradiction is now gripping the video gaming business. Given the amazing variety of consoles, portable devices, and PCs available to gamers thanks to gaming subscription programs like Xbox Game Pass and PlayStation Plus, one could argue that we are living in one of the best gaming eras. However, from the standpoint of the industry, the situation is severe. Large numbers of game developers, programmers, artists, and animators have been released, studios appear to be closing more frequently, and original intellectual properties are being abandoned in the middle of development. The AAA video game bubble has finally burst, to put it simply.
More than 23,000 jobs were lost in the video game sector in the last two years, with 6,000 of those losses occurring in January 2024 alone. Arkane Austin, Volition, and most recently Firewalk Studios are among the more than 30 video game development studios that have shut down. Even worse, there are indications that this tendency is simply going to continue rather than slow down. How did we arrive here? Some observers have concluded that these layoffs and closures are a necessary cure for businesses that overextended themselves during the COVID-19 pandemic in response to exaggerated market demand. Although that is unquestionably a contributing component, I think the real problem is with other long-standing problems in the AAA project bubble.
The average budget for AAA projects was between $50 and $150 million just five years ago. These days, $200 million is the minimal average. Activision acknowledged in the Competition & Market Authority’s report on AAA production that it now requires the work of one and a half studios to finish the annual Call of Duty game, setting a new standard of $300 million.
Call of Duty is hardly the only game with skyrocketing expenses. An unidentified publisher acknowledges in the same CMA investigation that $660 million was spent on the development of one of its franchises. That is a $1.2 billion game, plus $550 million in marketing expenses. To put that in perspective, the best-selling video game in the world, Minecraft, barely made $3 billion last year. Launched in 2011, it took 12 years to attain that number.
Due to the realities of these expenditures, entire publishing houses are severely overburdened and are now frantically dealing with the fallout: they will have to shut down if their developers’ large projects do not generate revenue right away. After seven years of development at Creative Assembly, Sega’s sci-fi shooter “mega game,” Hyenas, was canceled just as alpha testing made it available to the general public. Why? Sega came to the preemptive conclusion that Hyenas was unable to return its investment.
Blizzard’s survival project Odyssey had a similar course. Given the popularity of games like Rust and Minecraft, Odyssey would have been the studio’s first new IP in eight years. As such, it should have caused a stir. After Activision Blizzard was acquired by Microsoft, the project was quickly abandoned for no apparent reason other than the hassle of switching engines to boost the number of players on the servers.
