Polygon’s Letter to the Editor is Editor-in-Chief Chris Plante’s column that reflects on the video game and entertainment industries, their communities, and Polygon itself. New editions appear in the first week of every month.
Let’s start with a spoonful of sugar: making video games is faster, cheaper, and easier today than at any time in history.
The Internet’s belly is so generously filled with developer-friendly videos, podcasts, Discord channels, freely available educational courses, Github pages, and cheap ebooks that it can enjoy long hibernation. Video game engine licensors have removed the financial barrier to entry, taking their fees to the back burner. Skeptical of MegaCorps? Devs can also choose from an expanding roster of indie engines – some of them completely free. And when it’s time to publish, Steam and Itch.io will host a game and provide everything you need to convert ludological art into cold cash for a nominal cut.
We live in an age of opportunity. Which, ironically, is part of the problem. Change has been exponential and at the worst possible time. Over the past decade, video game developers – growing exponentially – have flooded the market faster than the industry (from AAA publishers to independent studios) can adapt.
Within that flood, a nightmarish economic scenario began to swirl: The COVID-19 pandemic created a temporary spike in interest that attracted misinvestment from video game outsiders and overspending from video game insiders. Venture capitalists entered hypothetical “high-ceiling” opportunities in blockchain, esports, and VR, rather than more established (but perceived “low-ceiling”) studios creating traditional, single-player experiences. And then, with all those bubbles fully inflated, fears of a recession kicked in US interest rates. Rates got so high that they now appear stuck in orbit, meaning the average game studio or investor would be very reluctant to borrow money to fund a new project.
Voila: the video game industry of 2024. Since January, industry leaders have been chanting the mantra “Survive to 25.” But I’m afraid the long-term forecast is clouded with the possibility of nonsense.
AAA death cycle
Consider, if you can muster the sympathy, a AAA video game publisher. Where in the past, a publisher’s individual games competed against a few dozen releases a year, they now compete against dozens a week. (Plus subscription services, forever-updated free-to-play games, and the latest patches or expansions for the biggest hits of past years.) These publishers have gotten big and comfortable with retail distribution systems that cost big money but barred upstarts from setting up. . Camp the shelves at GameStop and Walmart. With increasing profits, publishers opened studios around the world to create games that became more ambitious and expensive with each console cycle.
But slowly things changed. Valve launched Steam in 2003, creating an alternative way for a limited group of established game publishers to reach fans without the upfront distribution costs. Microsoft launched Xbox Live Arcade a year later, a curated digital distribution service celebrating handpicked, small, often independently developed games. By 2017 the dams were broken: all creators had the freedom to publish directly on platforms like Itch.io and Steam with minimal barriers.
Got a game? Don’t mind filing a tax form? You are ready!
In 2024, those AAA publishers that once maintained a herd-like grip on distribution and audience attention have been humbled. They share the same real estate as every other game available on Steam, Game Pass, or any other major digital storefront. The new halo blends into the same promotional rectangle as the latest Vampire Survivors A clone, a hentai visual novel or an indie darling that promises hundreds of hours of entertainment for the price of a cup of coffee. Imagine if the main distribution model for the film industry was YouTube – the biggest movies floating in an algorithmic sea of college student films, wedding videos, four-hour video essays, one-minute-long goofs and viral sludge that dare ask. “Is that cake?”
AAA video game publishers have doubled down on what they’ve done in the past to differentiate themselves in this market, making their games bigger and more realistic. As development budgets grow, marketing budgets are meant to offer some solace to these increasingly risky bets. Higher costs mean higher sales targets which means bigger games and bigger marketing to meet those targets, in turn driving higher costs. Snake meat tail.
Here’s just one result from this ridiculous loop of one-upmanship: In May, Final Fantasy 7 Rebirth was The fourth best-selling game of the year in the US is good news, right? Square Enix leadership described its sales as disappointing and the company’s Stocks fell They were the highest in 13 years. Simply put, a AAA game can no longer be a best-selling game; It must be This Best selling game. It is not sustainable.
I understand that among many in the gaming community, there is no love lost for publishers struggling to stay afloat in this new, more theoretically democratic age in which everyone has access to distribution. But remember that a publisher is not just a bunch of wealthy executives; Most of the people affected by this paradigm shift are game makers.
In 2023, Video game studio closed More than 10,000 people. In 2024, the video game industry hit that grim milestone in less than six months.
Go indie? Not so easy
If you’re an optimist (or an anarchist), these upheavals may seem like short-term pain that could lead to long-term gain. The old structures that consolidate capital are crumbling, and with the resulting stones, independent creators will build a better and more just future. But that will only be true if independent creators can pull together the funds to lay the groundwork.
Over the years, indie game studios have benefited from readily available investment and upfront payments. New services such as the Epic Games Store, Xbox Game Pass and Apple Arcade compete for exclusives; Venture capitalists were eager to throw money at anyone who was willing to say they loved NFTs; And interest rates were low.
Today, all that oil has been sucked out of the earth. As my former colleague Megan Farrokhmanesh Written on Wired, is an indie video game studio Also Struggling to survive in the current economic landscape. The same main problem that AAA publishers face – how can you help someone learn about your game when you have countless other options? – It remains the same. And unlike publishers, most indie developers don’t have millions of dollars in savings to fund an umbrella to weather this financial crisis.
So we have a AAA industry in trouble with no reasonable plan going forward, shedding thousands of game creators every year. And we have an indie game investment ecosystem that is no longer ready to provide an alternative.
I can’t shake this quote from Farrokhmanesh’s piece:
‘Live to 25’ assumes we are facing a long winter rather than burning our own crops three years ago. Until we start planting differently, until we start changing the way we work and think about making games, we will continue to see the highest highs and the lowest lows games have ever seen. And it could, in fact, get worse.”
So what does it mean to plan differently? I believe this problem is bigger than any one studio, let alone any one person. An industry that survives beyond ’25 will require experimentation with different approaches by small and large creators to find a replicable path forward.
Two steps towards a sustainable sports industry
I have a couple of thoughts to contribute to the conversation.
For indie studios, I’m thrilled to see funds helping indie studios get through this moment, especially Outersloth. between us Developer Innersloth that ““recovery and share” approach — meaning it wants to recoup its investment and share revenue. Of course, that assumes the games make their investment back — a feat most video games fail to accomplish.
At that point, skills are just as important as money. As investment becomes harder to come by, it’s more important than ever that indie game studio heads learn the intricacies of running a business. The industry needs better guidance and training programs. And universities with expensive game development degrees should make business a mandatory part of the curriculum. We can’t tell artists that they just need a great idea; That is simply not true.
And for AAA publishers, break the cycle of scale! If every publisher’s goal is to have the number 1 game on the market, I have some terrible mathematical news. There are a ton of studios and only one number 1 game. I can’t help but see the Marvel Cinematic Universe formula within the current AAA game development model, with executives addicted to past success recreating facsimile copies of tired franchises that beg to be sent to an upstate farm. AAA publishers must accept that the old dominance will not return. They must now work as part of a dense ecosystem, not as an exception to it. That means making more and smaller games, diversifying the portfolio, launching new IP and chasing underserved audiences.
Things are bad. Things could be worse. The boat is sinking and on fire. Now someone grabs an awesome bucket, someone grabs a fire extinguisher, and for all that is good in the world, someone starts thinking differently about where to ship this thing. Because if the industry does not seek Easy water soonThis boat is going down.
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