Two ways to save a struggling video game industry
By published
Creating video games has reached unprecedented levels of accessibility, presenting a unique challenge. The landscape for game development has transformed dramatically, making it quicker, more affordable, and simpler than ever before. A wealth of resources—ranging from instructional videos and podcasts to online courses and community forums—has emerged, providing aspiring developers with the tools they need to succeed. Game engines have minimized financial barriers, allowing creators to pay fees only after their games generate revenue. For those wary of large corporations, a growing selection of independent engines is available, many at no cost. When it comes to distribution, platforms like Steam and Itch.io offer straightforward avenues for developers to monetize their creations with minimal upfront costs.
We find ourselves in an era brimming with potential, yet this very abundance poses its own set of problems. The rapid pace of change has outstripped the industry's ability to adapt. Over the last decade, the number of developers has surged, overwhelming the market faster than both major publishers and indie studios can respond.
This influx has led to a troubling economic situation. The COVID-19 pandemic temporarily boosted interest in gaming, attracting misguided investments from outside the industry and excessive spending from within. Investors were drawn to speculative ventures in blockchain, esports, and virtual reality, overlooking the more traditional studios focused on single-player experiences. As these speculative bubbles grew, rising interest rates in the U.S. created a climate of caution, making studios and investors reluctant to finance new projects.
Thus, we arrive at the state of the gaming industry in 2024. Since the beginning of the year, industry leaders have been echoing the phrase “Survive to ’25.” However, the outlook appears grim. Consider the plight of AAA publishers: once, their titles faced competition from only a handful of releases each year, but now they contend with a deluge of new games weekly, alongside subscription services and continuously updated free-to-play titles. These publishers, having thrived in a retail environment that limited competition, expanded their operations globally, producing increasingly ambitious and costly games with each console generation.
The landscape began to shift with the launch of Steam in 2003, which provided a new distribution channel for established publishers, bypassing traditional retail costs. The following year, Microsoft introduced Xbox Live Arcade, showcasing smaller, often indie-developed games. By 2017, the floodgates opened, allowing all creators to publish directly on platforms like Itch.io and Steam with minimal barriers.
In 2024, the once-dominant AAA publishers now find themselves sharing digital space with every other game on platforms like Steam and Game Pass. The latest blockbuster competes for visibility alongside indie titles, niche games, and experimental projects. Imagine if the film industry operated solely through YouTube, where major releases vie for attention against a myriad of amateur content.
In response to this new reality, AAA publishers have doubled down on their traditional strategies, producing larger and more lifelike games. As development costs rise, so too do marketing budgets, creating a cycle of escalating expenses and sales expectations. A recent example illustrates this: despite being the fourth-best-selling game in the U.S. in May, Square Enix deemed the sales of Final Fantasy 7 Rebirth disappointing, leading to a significant drop in their stock prices. In today’s market, a AAA title must not just be successful; it must be the top seller, a model that is unsustainable.
While many in the gaming community may not sympathize with struggling publishers, it’s essential to remember that these entities are not merely faceless corporations; they are comprised of dedicated game developers. In 2023, over 10,000 individuals in the industry lost their jobs, and 2024 saw that number reached in under six months.
For those with an optimistic or radical perspective, this turmoil might be viewed as a necessary phase that could pave the way for a more equitable future. The old systems that concentrated wealth are disintegrating, potentially allowing independent creators to build anew. However, this can only happen if these creators can secure the necessary funding to establish a solid foundation.
Historically, indie studios have thrived on accessible funding and upfront payments. Platforms like Epic Games Store, Xbox Game Pass, and Apple Arcade have competed for exclusive titles, while venture capitalists eagerly invested in anyone expressing interest in NFTs. However, the current economic climate has drained these resources. As noted by a former colleague, indie studios are also grappling with survival in this challenging environment. The core issue remains: how can a game capture attention in a saturated market? Unlike larger publishers, most indie developers lack the financial reserves to weather this storm.
We face a dual crisis: AAA publishers are struggling without a clear path forward, shedding thousands of talented developers annually, while the indie investment landscape is no longer equipped to offer a viable alternative.
A poignant observation from a recent article highlights the gravity of the situation: “Survive till ’25” suggests we are enduring a prolonged downturn rather than recognizing the damage inflicted over the past three years. Without a shift in mindset and approach to game development, we risk perpetuating cycles of extreme highs and lows, potentially leading to even worse outcomes.
What does it mean to rethink our strategies? This challenge transcends individual studios or creators; the industry's survival beyond 2025 will necessitate diverse experimentation from both large and small developers to discover sustainable pathways forward.
I propose two ideas for consideration. For indie studios, I am encouraged by initiatives like Outersloth, a fund from the creators of Among Us, which adopts a “recoup and share” model—aiming to recover investments while sharing revenue. However, this relies on the games achieving financial success, a feat that many do not accomplish.
Equally important is the need for expertise. As funding becomes scarcer, it is crucial for indie studio leaders to grasp the complexities of running a business. The industry requires enhanced mentorship and training programs, and academic institutions offering game development degrees must incorporate business education into their curricula. It is no longer sufficient to tell creators that a great idea is all they need.
For AAA publishers, it is time to break free from the cycle of scale. If every publisher aims to produce the top game in the market, the math is unfavorable—there are countless studios and only one top title. The current AAA development model resembles the Marvel Cinematic Universe, with executives fixated on replicating past successes, churning out iterations of exhausted franchises. Publishers must recognize that the era of dominance has ended. They need to adapt to the crowded marketplace by creating smaller, more diverse games, launching new intellectual properties, and targeting underserved audiences.
The situation is dire, and it could deteriorate further. The industry is in turmoil, and immediate action is required. It’s time to grab the necessary tools and start rethinking our approach to navigate these turbulent waters. If the gaming industry does not find a way to stabilize soon, it risks sinking altogether.
