The Video Game Industry's Woes are Self-Inflicted

The big game makers are struggling to sell the latest—and allegedly greatest—games.

May 18, 2025

This post is a reaction to ideas presented in a recent article on Game Developer, and one of the posts it was spawned from.

Unlike other forms of entertainment media, the video game business is in a particular place. There was once a time where it dominated over cinema, television, music, and sports—and still had faster growth than all of them! Today, the situation is different. Not dire, just different. Audience growth has stalled. Excitement has either dulled or become muted. Nintendo has announced the long-awaited successor to its Switch console, but the drastically increased pricing of the new console’s exclusive games has raised some alarm. In all corners of the industry, there is talk of impending doom.

This past year, we have seen titles with enormous budgets release to zero fanfare, some of which were even removed from sale mere weeks after their release. Dozens of studios have closed, with no end in sight. Nearly every company not named Nintendo have laid off portions—sometimes quite significant—of their workforce. Prices for consoles and games are increasing everywhere. Ubisoft is bleeding. Microsoft’s Xbox is actively withdrawing from certain markets. Sony funded and recently released what is now known as the single biggest failure in the history of video games.

All this culminates in talks of “deprofessionalization”—the idea that career game developers are being pushed out and replaced by much more successful indie hobbyists. A game industry without large players means that career developers will ostensibly have a more difficult time staying in the industry. Without big players, all new developers will be indies who are betting their livelihoods on projects which may not succeed. It’s not a recipe for a healthy medium.

This warning, however, conveniently ignores the longtime status quo of labour in the video game industry. Most positions are filled by contractors, where there is an inherent lack of job stability. Many studios will lay off most of their staff after a large title is released—even in the event of a huge success—only hiring after a follow-up project begins ramping up, years later. There is a long history of “crunch”—mandatory overtime for months on end. Stable and healthy employment has always been the exception in the video games industry.

Nearly all big studios are built on unsustainable practices.

The biggest grossing titles from large studios are all predicated on the “live service”, living games where content continues to change. It’s a good strategy to build a loyal, regular player base… but only so long as those players interested in live services aren’t already busy with ongoing games demanding their attention. New ongoing games fail on arrival because that market is fully serviced.

Investors have not merely failed to learn from the failure of the MMO gold rush of the aughties—they are actively manufacturing further failures.

AAA development budgets have ballooned since the onset of the current console generation. Games look better than ever… which is to say, they look marginally better. Where games once took 2–3 years to develop, they now take 4–8 years. Development teams are four times the size they once were. Those napkin figures implicate a 10× increase in costs. Have games become 10× better? Have they become appealing to 10× the number of players as a decade ago?

I wouldn’t know. I play Nintendo or I don’t play¹.

And yet…

Nintendo appears to have not learned the lessons they ought to have with Nintendo Switch. It ran circles around two generations of its competitors' consoles, with lesser specs than all of them. However, compared to the ~CA$90 it costs me to buy new titles on the current console, Nintendo Switch 2’s games will cost me well over CA$120 each (after sales taxes). I bought about 3 games per year on Switch. At the new prices, I couldn’t justify buying more than 2 games per year. That’s the breaking point that has me asking whether it’s worth even owning a device which I can rarely add new experiences to. Unless something changes, this Nintendo fangirl is probably going to sit out the Switch 2’s launch.

(I’m not holding my breath.)

Where we have a mainstream game industry that insists on driving up costs without delivering more value, outsiders will inevitably fill the void. This is where we get Blue Prince, Balatro, and Vampire Survivors.

The history of games is rife with cycles innovation, followed by iteration, followed by revolution. A new game becomes very popular and well-known, spawning imitators each trying to capitalize on early successes by iterating on established mechanics. These follow-ups tend to appeal to certain connoisseurs who then iterate and complicate further. Newer products become more niche, markets become fragmented, until eventually someone comes along and boils down all the niche gameplay innovations into a simplified game with easy to understand rules, setting a new standard². Evolution goes in all sorts of directions until some random mutation leads to vastly increased fitness. The new hotness outcompetes its relatives, and wipes them out. AAA gaming is a big hulking reptile, and the asteroid has already landed. The oxygen is leaving the room as you read this and so will they if they don’t adapt. The gaming tech arms race is a game of chicken, but only the chickens will live to play another day.

If the mainstream games industry wants to survive, it needs to read the room and adapt.