The gaming industry is facing its biggest crisis since the 1983 crash. This opinion was expressed by Epic Games CEO Tim Sweeney in a new issue of Edge magazine, dedicated to the so-called “Crash 2.0”.
In issue #428, nine industry experts discussed the causes of the current crisis and possible ways out of it. According to Sweeney, the problems are both internal and external. Among the main internal factors, he highlighted the rapid increase in the cost of developing AAA games, and among the external ones, the shortage of components, caused in part by the artificial intelligence boom and the construction of new data centers.
According to Sweeney, companies investing in AI infrastructure are able to compete with the entertainment industry for available production capacity.
As a result, the gaming industry gets “a smaller piece of the pie”, while prices for RAM and storage are already increasing several times over. Sweeney believes that the shortage of equipment needed to produce gaming devices could continue for about three more years. In his opinion, only the construction of a huge number of new production facilities can rectify the situation.
However, the crisis is not limited to component problems. Playable Worlds CEO Raph Koster has been warning for many years about the rapidly increasing cost of game development. As early as 2005, he concluded that game development costs increase by approximately tenfold every decade.
In 2017, Koster repeated his analysis, examining data from 250 games released over 30 years, and got a similar result. Adjusted for inflation, AAA game development for PC or consoles cost approximately $1 million in the mid-1990s, $10 million in 2005, and already $100 million in 2015.
Today, the budgets of the largest projects, according to Sweeney, reach $250–400 million.
Former PlayStation head Shawn Layden believes that the industry needs to rethink its approach to game development. In his opinion, companies should create projects with smaller budgets and accept the fact that not every game has to bring in hundreds of millions of dollars.
If it brings in only $50 million — that's good. Let's find a model where $50 million is a good result, not a bad one.
He also called financial resources “the main constraint that never expands”. Layden urged developers to abandon elements that increase production costs but have little impact on the gaming experience.
As an example, he cited huge open worlds. If it takes a player 45 minutes to cross a virtual world on foot, but such a scale is not related to gameplay or plot, developers, in his opinion, are simply spending additional money to demonstrate technology.
Koster, in turn, believes that the current crisis cannot be overcome without a serious industry reboot. According to him, the gaming industry develops cyclically, and real changes occur when a new platform emerges that can radically change the existing model.
At the same time, artificial intelligence, according to Koster, will not be such a reboot. He believes that AI will not necessarily make development cheaper: an increase in computing power leads to an increase in resource consumption and costs.
The impact of AI on team sizes was separately noted by former Tencent Business Development Director Amir Satvat. He believes that the most indicative factor will not be the creation of games by one or two people, but the reduction of large teams.
A team of 50–60 people turns into a team of 20, and a team of 400 people turns into a team of 100.
According to him, AI-based tools, including Claude, largely contribute to this. However, Satvat warns that companies are already facing the downside of this approach: some studios cut employees, hoping to compensate for losses through AI, and then found that they had laid off too many people and were forced to rehire staff.
According to Satvat, the cuts most affected the UK, Northern and Western Europe, and North America.