Epic Games CEO Tim Sweeney says the industry is going through its biggest crash since the 1980s in the latest issue of Edge magazine.
Contributing editor Alex Spencer spoke with nine experts in issue 428 for their views on “Crash 2.0”, and what the future might hold for the industry.
Sweeney noted the industry faces “internal dysfunctions,” such as the high cost of AAA game development, and outside challenges including the ongoing component shortage.
“It’s an unexpected, severe disruption,” he said, in reference to the component crisis. “There’s an unprecedented wave of investment in building AI systems and data centres, based on the belief that they’re going to have a really transformational role in the economy, and the scale of the economic opportunity there means they can outbid the entire entertainment industry for all the components.”
“So we’re getting the short end of the stick, and the prices of RAM and storage are quadrupling, and not necessarily stopping there. We should expect there’s just going to be a continual supply crisis for all gaming-relevant hardware for the next three years. The only solution, I think, is going to be building massive new factories to meet the world’s capacity demands – and that will happen.”
“Unless we hit singularity, a platform will come along that changes things”
Raph Koster
Playable Worlds CEO Raph Koster has warned for years about how expensive game development has become.
“I think the first time I spoke about, ‘Hey, cost is going to kill us’ was in 2005,” Koster said. Back then, he concluded that “the cost of game development goes up about 10 times every decade.”
He repeated his analysis in 2017, using data from 250 releases over thirty years, and found the same result. After adjusting for inflation, AAA game development for consoles or PC cost about $1 million in the mid-1990s, $10 million in 2005, and $100 million in 2015.
Sweeney pointed out that budgets now reach between $250 million and $400 million.
Former PlayStation boss Shawn Layden said that if developers keep budgets and costs low, they can support games “with a lower probability of financial success.”
“By which I mean: ‘It’s only going to make $50 million’? Well, OK. Let’s find a model where making $50 million is a good thing, not a bad thing. I think that’s where the future is going to come from – people moving into that space.”
He also described financial resources as “the great constraint that never gets expanded.”
“Do you need to model an entire world that takes 45 minutes to walk across? If there’s not a reason for that – if it’s not pushing the experience or story forward – that’s just a party trick. You’ve spent a bunch of time – which means money – on something that doesn’t mean anything.”
Koster believes the only way out of Crash 2.0 is a complete reset. “Our industry is cyclical. Unless we hit singularity, a platform will come along that changes things.”
“AI is not a platform reset, where costs get lower. AI is just a computer getting bigger, and so the gas will keep filling it […] It is actually incredibly expensive, in the end, so most of the benefit flows upwards. AI is changing things very rapidly, and it also doesn’t matter.”
Former Tencent business development director Amir Satvat also talked about how AI is affecting team sizes.
“A game that’s been made by one or two people, that’s great,” he noted. “But I’m more interested in what would have been a 50-to-60 person team becoming a 20-person team, and the 400-person team becoming a 100-person team, as people are trying to find more efficient ways to do things.”
“If you’re a game developer based in North America or western Europe, in a traditional AAA studio – that is ground zero for destruction”
Amir Satvat
“That phenomenon of the 50-person teams becoming 20, I think the reason a lot of people are doing that – or believe they can do that – is because they have all these tools like Claude.”
Satvat continued: “Are you actually getting a measurable productive gain in what you’re doing because you’re using these tools? I’ve seen firms that made staff reductions because they thought they could, due to AI, and are now realising that they cut too many people and are hiring back.”
Satvat says staff cuts have hit the UK, northern and western Europe, and North America the hardest.
“I think this is as bad as the ’83 crash if you’re a game developer based in North America or western Europe, in a traditional AAA studio. That is ground zero for destruction.”