These blog posts tend to take on huge issues and be already overlong, which means I tend to forget to address things I should. Like this big question: Is the game industry in recession at all?
(In our normal life, these numbers are way too low for what we're living. But stick with them for now.)
Once the covid surge was done, the industry shrank, while inflation was huge. In real dollars, our sales took a huge hit. I believe we're seeing the consequences of this now.
In my personal live, or sales have gone down, but nothing we haven't survived before. But they prices we have to pay for literally everything have gone up a lot. Inflation was too huge and contentious a topic for me to address in the blog above, but it is a VERY important factor in what's been happening.
Great article as always. I really like the quote from your 2013 article: "If your game can't succeed based on word-of-mouth marketing, unless you get real lucky, you need to adjust your budget, your quality, or both."
This is something we have always believed too, and it feels particularly true now. Feels like a lot of hurt in the indie space has also come from studios who don't plan numbers-first (i.e. overhead vs. possible revenue, as opposed to just building a dream team for the sake of it).
Note that this quote is purely about indie games from young companies. Word of mouth is honestly the only way forward for most, though you do have to seed that with LOTS of hustling online.
But it still largely holds true. Indie devs have been trying to get around it with investment, and it's worked to some extent. But advertising is very expensive, hard to get right, and often just fails.
I dont fully understand what "Limited Games" is but it sounds like it is what Steam calls unsuccessful games. Which really compliments your argument. The number of published games is skyrocketing while the number of minimally successful games is only increasing minimally (~6.5% per year).
Do you think there may be more market forces at work here? This last year really seems like customers has just rejected AAA studios. All the biggest most successful most praised releases were indie games. I am not sure if AAA studios are releasing worse games, indies are releasing better games, or with the fall of TV and the ascendance of independent content creators the marketing landscape has simply been leveled. But it really feels to me like a significant portion of the market no longer respects AAA developers and that they have lost their monopoly on most of the customers.
For me, personally, AAA games have lost almost all of their appeal. With a few exceptions (mostly by Nintendo), I find them overly restrained and joyless.
However, I don't really know they sell, and some of them (like Hogwarts) are doing really well. I think there is a huge oversupply, and it's coming from a lot of sources.
Hogwarts is doing really well, but it is marketed to Harry Potter fans (google says 18% of America has read every HP novel), as well as gamers. They have a whole extra market to draw upon. And from what I am reading BG3 still outsold them. And Lethal Company and Palword (sold more PC copies then BG3) are hovering not far behind, both these titles would easily of outsold the HL with its hundreds of millions of dollar budget if not for the HP IP.
I dont think it is just you or just me, 5 years ago half the top sellers would not be indie games.
I think what happened is that the rising costs of AAA development with stagnant game prices led AAA studios to seek ever-widening audience. But apparently the strategy used (probably suggested by outside market research agencies?) seem to have failed badly, ending up alienating more customers than it attracted. It seems that the same thing happened to big movie studios: there was a string of failures of recent big-budget super-hero movies. Some attribute it to excessive "wokeness", but I think the problem is more general, "playing it too safe" and "bad market research". It is likely that these failures will be taken into account, because big business usually is not too stupid and can take a clue (with some time delay, of course).
Is there a way out of budget problems? Well, some say raise the prices, but this won't go over well. The only way is to cut budgets, and in modern world, this mean more AI everywhere. I think this is very likely that usage of AI-assisted development will go from questionable practice to industry standard pretty soon. This will mean even less jobs of one kind (manual labor artists, VO actors), but probably more jobs of other kinds (AI wranglers). Art direction and sound direction jobs will become even more important, since you can't hope AI will "get" your intended style like a human artist, so a supervision of all produced art will become a must. And after big studios will develop tools and practices, indies will pick them up, too, as people will leave AAA software houses to develop their dream games independently.
"The only way is to cut budgets, and in modern world, this mean more AI everywhere."
Anything is possible, but this has not been shown to be true. Everyone who is beating AAA is just doing it with traditional developers who are simply more productive.
We can say with absolute certainty that we can trim down the AAA budgets to .01% of what they currently are utilizing old fashioned grit and hard work. because that is being done over and over and over again. We can only theorise that maybe AI could take it even further, because no one has pulled that off to the same level of success.
These AAA studios just need to fire 80% of their staff.
"These AAA studios just need to fire 80% of their staff."
I would really hesitate about saying things like this. I really don't think you are correct. There are a lot of companies with a lot of different products and practices, and this sort of development is highly labor-intensive.
Whatever the results of that scale of layoff would be, it would involve a huge amount of suffering. It's not something I would call for casually, if at all.
Fair enough, everyone I follow on twitter has been saying that for 10 years but I am just parroting and dont really have any useful knowledge or views on the matter.
But I will say the suffering happens either way. If someone in stuck in a role where they do nothing and learn nothing, and just get a paycheck for the next 20 years that is suffering. And if someone or a group drag a studio into bankruptcy, that is not less suffering than if they were just half of them where fired a few months before.
The steam graph you posted seems to show something like a 70-80% too many games. That I not where I came up with that number, but I find it interesting that they align.
I think that 80% figure is a huge exaggeration. AAA-level quality requires a lot of people. When you say "Everyone who is beating AAA" you mostly mean people whose games stand out on strength of their gameplay or story (like our esteemed host here), but as soon as you start to reach out for cinematic cutscenes and realistic graphics, you find out that your staff requirements begin to balloon quickly. Are these features required for a great game? Not necessarily, but there are a lot of players who desire them. As well as full voice-over, which also simply isn't feasible without deep pockets and a number of specialists.
Is there some dead weight at big studios? Certainly. But nobody is "beating" them at visual and sonic quality using just "grit". In some cases, it's just lower salaries in Easter Europe (CDPR/Witcher 3), so you can hire more people with lower budget. New, better tools help, too - I see a significant increase in quality of indie RPG graphics recently, mostly due to Unreal 5 and associated tools, it seems. But even everyone's darling, Baldur's Gate 3, whose budget, I assume, approaches AAA figures, looks cheap at times (their cinematic cutscenes are superb, but in-game cutscenes don't impress me that much, and hair in this game look worse than in some 10-year old AAA titles).
I have pretty eclectic taste but unless I am way off the mark here, Helldivers 2 is possibly the best photorealistic game ever released. It stands toe to toe with COD (the only other photorealistic game that looks basically perfect, it is hard to imagine either looking better). Now it pulls this off by having limited environments and no player faces, but I dont think any players are complaining that they did not include hair physics. And Palworld looks like AAA non photorealistic releases. TotK or Pokemon come to mind. Way less work to pull off, but still good enough to sell hundreds of millions of copies.
It is hard to say, it is my understanding is that it is a universal law that in big bureaucratic organizations 10% do 50% of the work, with the next 10% doing an additional 30%. You also have to account for the fact that by the time you get to the bottom 10% you are likely going to be measuring negative work. I cannot say anything with any amount of evidence for any development studio, other than statistics and history would imply that yes, the vast majority of Software Developers are not producing anything significant in a studio. In studios we have reason to believe are dysfunctional, I expect this is even more true.
So when I say 80%, I dont mean they should scale down and just do less, I specifically mean that I believe their is hard evidence that that some significant percentage is doing 0% of the work collectively. But it is hard to say, I have no personal experience in how these studios work.
From experience, going from something like Pathfinder: Wrath of the Righteous to something like Baldur's Gate 3 requires about two/three times as many employees, and BG3 isn't even really "AAA" (although with its alleged 100M$ budget it's close enough, I guess, as Wiki says today AAA games have 150-300M$ budgets). I really can't judge Helldivers (or CoD, for that matter), but I can speak for RPG developers, and the amount of man-hours you need to make something like god damned improved kissing animations (introduced in BG3 Patch 6) is astounding. But if you don't make them, romance scenes look comedic (not that it prevents the game from being a best-seller, but it certainly detracts from polished feeling).
And, man, any RPG studio can always do with 1 more year of polishing and bug-fixing before release... People complain all the time about broken games on release, but there is never enough time or manpower to ensure everything works as intended, especially when you have a lot of branching paths and complex builds and party compositions.
I disagree (oh wonder, a random stranger on the internet does not agree :) )
The industry is known for its extreme crunch. So basically, they are already doing too much with too little. The pure man-power required to produce a AAA product is mind-boggling.
Certainly, you might be able to cut costs with some innovations. But it will be more like 10%, not the 99.99% you're suggesting.
I dare say there is no "traditional developer" that can compete with a AAA studio in the amount of content and detail. You might beat them in one niche (like Jeff Vogel does most likely).
Nowadays many universities offer degrees in game design. These degrees typically require a team to shepherd a game all the way through development, including release on a storefront. Those 14000 games? Most of them are student projects. They're on Steam so the poor student doesn't flunk out.
I am of the opinion that the tech giants gained their monopolies through unprecedented central bank largess. This during the 2008 recession and again with the pandemic. Is there a reason to think the pattern won't repeat itself? I don't know. But if it doesn't, the upcoming 'correction' may end up massacring the so-cheap-as-to-be-almost-free-or-actually-free model followed by our main competitors in the entertainment market. In other words, maybe indie devs will find themselves in a healthier and more sustainable market once the dust settles? I mean, the games biz these days seems to function like Bitcoin. Please see infographic below.
I think you can boost your games revenue adding translations to other languages. I know it costs, but could it be profitable? For example, I really want buy and play it in Russian. Or you could think about other popular languages (Spanish). Have you consider this? You are inspiration for me, thank you.
Long story short: Our games have so many words that they're expensive to translate, not enough to justify the work with a game so niche. Other indie games have far fewer words.
Translation is expensive and unless you have translators you know will do a good job, it's easy to pay a lot for a subpar product or just get ripped off.
These blog posts tend to take on huge issues and be already overlong, which means I tend to forget to address things I should. Like this big question: Is the game industry in recession at all?
Here's a chart of our gross sales: https://www.statista.com/outlook/dmo/digital-media/video-games/worldwide#revenue
(Note that 2023 in this chart is still just a very rosy estimate.)
Here's inflation at the same time: https://www.usinflationcalculator.com/inflation/current-inflation-rates/
(In our normal life, these numbers are way too low for what we're living. But stick with them for now.)
Once the covid surge was done, the industry shrank, while inflation was huge. In real dollars, our sales took a huge hit. I believe we're seeing the consequences of this now.
In my personal live, or sales have gone down, but nothing we haven't survived before. But they prices we have to pay for literally everything have gone up a lot. Inflation was too huge and contentious a topic for me to address in the blog above, but it is a VERY important factor in what's been happening.
Great article as always. I really like the quote from your 2013 article: "If your game can't succeed based on word-of-mouth marketing, unless you get real lucky, you need to adjust your budget, your quality, or both."
This is something we have always believed too, and it feels particularly true now. Feels like a lot of hurt in the indie space has also come from studios who don't plan numbers-first (i.e. overhead vs. possible revenue, as opposed to just building a dream team for the sake of it).
Note that this quote is purely about indie games from young companies. Word of mouth is honestly the only way forward for most, though you do have to seed that with LOTS of hustling online.
But it still largely holds true. Indie devs have been trying to get around it with investment, and it's worked to some extent. But advertising is very expensive, hard to get right, and often just fails.
I dont fully understand what "Limited Games" is but it sounds like it is what Steam calls unsuccessful games. Which really compliments your argument. The number of published games is skyrocketing while the number of minimally successful games is only increasing minimally (~6.5% per year).
Do you think there may be more market forces at work here? This last year really seems like customers has just rejected AAA studios. All the biggest most successful most praised releases were indie games. I am not sure if AAA studios are releasing worse games, indies are releasing better games, or with the fall of TV and the ascendance of independent content creators the marketing landscape has simply been leveled. But it really feels to me like a significant portion of the market no longer respects AAA developers and that they have lost their monopoly on most of the customers.
For me, personally, AAA games have lost almost all of their appeal. With a few exceptions (mostly by Nintendo), I find them overly restrained and joyless.
However, I don't really know they sell, and some of them (like Hogwarts) are doing really well. I think there is a huge oversupply, and it's coming from a lot of sources.
Hogwarts is doing really well, but it is marketed to Harry Potter fans (google says 18% of America has read every HP novel), as well as gamers. They have a whole extra market to draw upon. And from what I am reading BG3 still outsold them. And Lethal Company and Palword (sold more PC copies then BG3) are hovering not far behind, both these titles would easily of outsold the HL with its hundreds of millions of dollar budget if not for the HP IP.
I dont think it is just you or just me, 5 years ago half the top sellers would not be indie games.
I think what happened is that the rising costs of AAA development with stagnant game prices led AAA studios to seek ever-widening audience. But apparently the strategy used (probably suggested by outside market research agencies?) seem to have failed badly, ending up alienating more customers than it attracted. It seems that the same thing happened to big movie studios: there was a string of failures of recent big-budget super-hero movies. Some attribute it to excessive "wokeness", but I think the problem is more general, "playing it too safe" and "bad market research". It is likely that these failures will be taken into account, because big business usually is not too stupid and can take a clue (with some time delay, of course).
Is there a way out of budget problems? Well, some say raise the prices, but this won't go over well. The only way is to cut budgets, and in modern world, this mean more AI everywhere. I think this is very likely that usage of AI-assisted development will go from questionable practice to industry standard pretty soon. This will mean even less jobs of one kind (manual labor artists, VO actors), but probably more jobs of other kinds (AI wranglers). Art direction and sound direction jobs will become even more important, since you can't hope AI will "get" your intended style like a human artist, so a supervision of all produced art will become a must. And after big studios will develop tools and practices, indies will pick them up, too, as people will leave AAA software houses to develop their dream games independently.
"The only way is to cut budgets, and in modern world, this mean more AI everywhere."
Anything is possible, but this has not been shown to be true. Everyone who is beating AAA is just doing it with traditional developers who are simply more productive.
We can say with absolute certainty that we can trim down the AAA budgets to .01% of what they currently are utilizing old fashioned grit and hard work. because that is being done over and over and over again. We can only theorise that maybe AI could take it even further, because no one has pulled that off to the same level of success.
These AAA studios just need to fire 80% of their staff.
"These AAA studios just need to fire 80% of their staff."
I would really hesitate about saying things like this. I really don't think you are correct. There are a lot of companies with a lot of different products and practices, and this sort of development is highly labor-intensive.
Whatever the results of that scale of layoff would be, it would involve a huge amount of suffering. It's not something I would call for casually, if at all.
Fair enough, everyone I follow on twitter has been saying that for 10 years but I am just parroting and dont really have any useful knowledge or views on the matter.
But I will say the suffering happens either way. If someone in stuck in a role where they do nothing and learn nothing, and just get a paycheck for the next 20 years that is suffering. And if someone or a group drag a studio into bankruptcy, that is not less suffering than if they were just half of them where fired a few months before.
The steam graph you posted seems to show something like a 70-80% too many games. That I not where I came up with that number, but I find it interesting that they align.
I think that 80% figure is a huge exaggeration. AAA-level quality requires a lot of people. When you say "Everyone who is beating AAA" you mostly mean people whose games stand out on strength of their gameplay or story (like our esteemed host here), but as soon as you start to reach out for cinematic cutscenes and realistic graphics, you find out that your staff requirements begin to balloon quickly. Are these features required for a great game? Not necessarily, but there are a lot of players who desire them. As well as full voice-over, which also simply isn't feasible without deep pockets and a number of specialists.
Is there some dead weight at big studios? Certainly. But nobody is "beating" them at visual and sonic quality using just "grit". In some cases, it's just lower salaries in Easter Europe (CDPR/Witcher 3), so you can hire more people with lower budget. New, better tools help, too - I see a significant increase in quality of indie RPG graphics recently, mostly due to Unreal 5 and associated tools, it seems. But even everyone's darling, Baldur's Gate 3, whose budget, I assume, approaches AAA figures, looks cheap at times (their cinematic cutscenes are superb, but in-game cutscenes don't impress me that much, and hair in this game look worse than in some 10-year old AAA titles).
I have pretty eclectic taste but unless I am way off the mark here, Helldivers 2 is possibly the best photorealistic game ever released. It stands toe to toe with COD (the only other photorealistic game that looks basically perfect, it is hard to imagine either looking better). Now it pulls this off by having limited environments and no player faces, but I dont think any players are complaining that they did not include hair physics. And Palworld looks like AAA non photorealistic releases. TotK or Pokemon come to mind. Way less work to pull off, but still good enough to sell hundreds of millions of copies.
It is hard to say, it is my understanding is that it is a universal law that in big bureaucratic organizations 10% do 50% of the work, with the next 10% doing an additional 30%. You also have to account for the fact that by the time you get to the bottom 10% you are likely going to be measuring negative work. I cannot say anything with any amount of evidence for any development studio, other than statistics and history would imply that yes, the vast majority of Software Developers are not producing anything significant in a studio. In studios we have reason to believe are dysfunctional, I expect this is even more true.
So when I say 80%, I dont mean they should scale down and just do less, I specifically mean that I believe their is hard evidence that that some significant percentage is doing 0% of the work collectively. But it is hard to say, I have no personal experience in how these studios work.
From experience, going from something like Pathfinder: Wrath of the Righteous to something like Baldur's Gate 3 requires about two/three times as many employees, and BG3 isn't even really "AAA" (although with its alleged 100M$ budget it's close enough, I guess, as Wiki says today AAA games have 150-300M$ budgets). I really can't judge Helldivers (or CoD, for that matter), but I can speak for RPG developers, and the amount of man-hours you need to make something like god damned improved kissing animations (introduced in BG3 Patch 6) is astounding. But if you don't make them, romance scenes look comedic (not that it prevents the game from being a best-seller, but it certainly detracts from polished feeling).
And, man, any RPG studio can always do with 1 more year of polishing and bug-fixing before release... People complain all the time about broken games on release, but there is never enough time or manpower to ensure everything works as intended, especially when you have a lot of branching paths and complex builds and party compositions.
I disagree (oh wonder, a random stranger on the internet does not agree :) )
The industry is known for its extreme crunch. So basically, they are already doing too much with too little. The pure man-power required to produce a AAA product is mind-boggling.
Certainly, you might be able to cut costs with some innovations. But it will be more like 10%, not the 99.99% you're suggesting.
I dare say there is no "traditional developer" that can compete with a AAA studio in the amount of content and detail. You might beat them in one niche (like Jeff Vogel does most likely).
Nowadays many universities offer degrees in game design. These degrees typically require a team to shepherd a game all the way through development, including release on a storefront. Those 14000 games? Most of them are student projects. They're on Steam so the poor student doesn't flunk out.
I am of the opinion that the tech giants gained their monopolies through unprecedented central bank largess. This during the 2008 recession and again with the pandemic. Is there a reason to think the pattern won't repeat itself? I don't know. But if it doesn't, the upcoming 'correction' may end up massacring the so-cheap-as-to-be-almost-free-or-actually-free model followed by our main competitors in the entertainment market. In other words, maybe indie devs will find themselves in a healthier and more sustainable market once the dust settles? I mean, the games biz these days seems to function like Bitcoin. Please see infographic below.
https://davidgerard.co.uk/blockchain/wp-content/uploads/2018/01/rollercoaster-explosion.gif
Call me a dreamer if you will. :)
Hi Jeff, could you provide some context on what kind of magic did Huestess' people dabbled on.
I think you can boost your games revenue adding translations to other languages. I know it costs, but could it be profitable? For example, I really want buy and play it in Russian. Or you could think about other popular languages (Spanish). Have you consider this? You are inspiration for me, thank you.
Long story short: Our games have so many words that they're expensive to translate, not enough to justify the work with a game so niche. Other indie games have far fewer words.
Translation is expensive and unless you have translators you know will do a good job, it's easy to pay a lot for a subpar product or just get ripped off.