- Technological advancements and the global economy have led to the video game industry aggressively chasing revenue & profit.
- In their thirst for profit, companies often overlook the human cost of doing business, resulting in huge layoffs. Something we’ve seen consistently in the last two years.
- The cycle needs to be broken in order to shift the industry’s focus to creating fun games without the perpetual increase in budgets and resources.
We’re almost at the end of another year and 2023 has given us some fantastic titles. As players, it’s something that we should be grateful for given that we’re paying customers. Despite getting what we paid for, there’s something wrong with the video game industry at the core. After all the remakes we’ve gotten in recent years and with more to come, I believe it’s time the industry itself got that treatment.
Or perhaps it needs a hard reset, something that would take it all back to square one and force everyone to start from scratch. Regardless of whether it’s a remake or a hard reset, the point is that the video game industry is stuck in a cycle, seemingly consuming itself.
While it may not be all doom and gloom for some as long as they get top-quality exclusives and their favorite classics remade in modern graphics, there are some critical issues with the video game industry, in my opinion, that need to be pointed out.
Revenue Chasing & The AAA Paradox
This should come as no revelation but in case you somehow managed to elude this truth till now, the reality is that video games were always about making money—even back when you got a full game on launch day with no DLC or other paid content, minimal bugs and technical glitches that could impact your game, and zero cash shop prompts every ten seconds.
With time, new techniques and mechanisms were discovered to make profits as all businesses are wont to do. The rise of gacha systems marked by Maplestory and the subsequent revelation of microtransactions via the Skyrim horse led to a realization that there are smarter ways to make money. This would lead to the beginning of aggressive revenue chasing & monetization, ultimately resulting in what I call the AAA paradox.
Before talking about revenue chasing in the video game industry, I’m going to clarify the paradox first. “AAA” refers to a standard that categorizes games with relatively high budgets, distributed by mid to high-range publishers. A lot of resources are funneled into them and a similar degree of profit margins are thus expected in return. With the advent of post-launch monetization, season passes & the like were introduced in these titles as well.
As development costs and budgets gradually climb the ladder due to technological advancements and the global economy, AAA development takes a hit to its sustainability. Still, the demand for these experiences remains strong. Due to rising costs, corporates need avenues to increase profit margins resulting in revenue chasing via draconian monetization practices, DLC, season passes, and everyone’s “favorite” live-service model.
If at this point you’re asking the question “Why?” the answer is simple—the video game industry was always about money. Plus, we all know that everyone wants to make more of it. This then leads to astronomical amounts of revenue and profits, thus lending more weight to them in comparison to big-budget AAA blockbusters. The creator of Nier, Yoko Taro, also commented on this in an interview with Inverse.
The big challenge with large-scale game development is that it needs time and money. But at the same time, you can also say that those barriers are protecting the market. I think you can see that by looking at the other end of the industry and how the indie market, where those barriers do not exist, is such a competitive blood-filled sea.”
In layman’s terms, there’s no version of this where an Elden Ring or Marvel’s Spider-Man 2 will make more money than Destiny 2. I mean, there’s a reason why Sony bought Bungie for almost 4 billion dollars. That game alone has generated an estimated 200 million dollars in revenue. Furthermore, its numbers on the microtransaction side exceeded $160 million bucks in less than two years.
This should give you an idea of how easy it is for companies to rake in the cash with live-service titles. Meanwhile, AAA blockbusters, while in demand, eat up resources and take longer to make due to leaps in tech. Seems counterintuitive, right? Technical advancements should equal high quality and less time taken but it’s an opposite story here.
And so, the current state of the video game industry has made it unfeasible for studios to develop AAA games. Big names like FromSoftware, Capcom, and Sony setting a benchmark combined with rising costs of high-end game development has led to developers either risking it all in a do-or-die approach or playing it safe to the point of delivering something lackluster in comparison to those at the top.
It then leads to studios either choosing the path of live service and GAAS, bringing down the curtain on their career as a whole, or laying off employees as if it’s a Sunday morning garage sale. And that brings me to the next problem…
The Video Game Industry & Layoffs
As if the video game industry didn’t have enough problems, the revenue chasing, AAA paradox, and a shift to live-service games, studios have started laying off staff. It’s like there’s an international championship in place to see who can give the boot to their entire employee list first.
This may be an exaggeration but it’s like there’s a new studio axing an entire room of employees every other day I wake up. 2023 alone has seen a massive amount of layoffs in a rather short period. Immortals of Aveum’s studio fired nearly half of its team, Naughty Dog fired its contract workers, PlayStation Visual Arts suffered a wave of layoffs, and the Embracer Group restructured itself which resulted in layoffs and studio closures.
I've been laid off from @Bungie. A surreal thing to write as I sit here pondering what went wrong. I'm still processing it all and while my first instinct is anger I know I'd regret what I'd say.
Thank you to everyone at Bungie who helped make my last 5+ years the best ever.
— Griffin Bennett (@GriffinWB) October 30, 2023
And even last year, Microsoft showed 1000 of its employees to the exit. These are just a few of the several contestants in the “layoff race“. I honestly wonder about the implications it will have on the video game industry since I’m already aware of the problems faced by those suffering from this restructuring process. Not only does it impact the personal ecosystem of an employee, but it can also affect the habitat as a whole.
And if that wasn’t enough, even Bungie decided to join the race. According to Bloomberg reporter, Jason Schreier, the studio has laid off an undisclosed number of staff as part of the ongoing job cuts at PlayStation. Furthermore, Schreier states that The Final Shape and Marathon have been pushed to June 2024 and 2025 respectively.
With how the video game industry is treating employees in recent times, it’s clear that it lacks stability. This is a result of various factors mixing, including revenue chasing and the dynamic surrounding AAA games. And this brings me to the next part…
Breaking The Cycle
The only way for the video game industry to get out of this is to break free from the flow. The status quo supports revenue and profits at the expense of sustainability, growth, and human interest. Now in case you’re scratching your head, the reason I said “human” instead of “consumer” is because of the employees being laid off.
I believe that games as an art form can reach greater heights but the current dynamic of the video game industry hinders this. You can argue that art doesn’t need next-gen. hyper-realistic graphics but it would be disingenuous to say that it won’t benefit from it. However, if it’s becoming expensive to use all this technology and development cycles are getting longer, then perhaps it’s better to dial things back a little.
Speaking to Inverse, Yoko Taro stated how he’d like to see aliens attack Earth and destroy all of the silicon-based tech returning us all to the 8-bit era. Not only that, he said that this would force game creators to make a living developing games in that low-tech environment. His view of the video game industry perfectly encapsulates its failures and the necessity of change.
But to achieve change, a drastic shift would be required. Everything comes at a price; the price for change can be significantly more expensive than a $70 game.
Rebooting The Video Game Industry
As stronger hardware graces the video game industry, player expectations increase in part due to the lofty promises by people in suits. Such promises include native 4K gaming with consistent 60-120 FPS and ray tracing turned on. While such benchmarks are attainable on top-end PCs, it’s yet to be truly achieved on consoles.
The pursuit of these numbers along with wanting to create hyper-realistic games results in sky-high budgets. Since the cost is gigantic, the risk is even greater and it results in some studios in the video game industry getting the axe if they can’t produce a hit. In some cases, even a hit doesn’t meet sales expectations. I’m not going to say that AAA game development is unsustainable but the decisions companies take are certainly making it that way.
And if things are like that, the best course of action, in my opinion, is to focus on creating fun games rather than titles with realistic faces. If people are exposed to something right off the bat, they get accustomed to it. Shifting the attention towards crafting enjoyable experiences more often than big hits, getting out of the revenue chase, and letting developers utilize their passion and skill is the only way to reinvigorate the video game industry.
It’s possible to consistently produce top-budget hits as we can see with studios like FromSoftware and Insomniac Games, but in today’s landscape, this is an exception and not the norm. People may love their particle effects and investors may love their profits but I believe it’s time we pressed the big red button.
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