Polygon’s Editor’s Letter is a column by Editor-in-Chief Chris Plante covering the video game and entertainment industries, their communities, and Polygon itself. New issues appear the first week of each month.
Let’s start with a quick note: video game development is faster, cheaper and easier today than ever before in history.
The belly of the internet is so lushly filled with developer-friendly videos, podcasts, Discord channels, freely available academic courses, Github pages, and cheap ebooks that it could enjoy a long hibernation. Video game engine licensors have virtually eliminated the financial barrier to entry, collecting their fees on the backend side. Skeptical of megacorporations? Developers can also choose from a growing list of indie engines—some of which are completely free. And when it’s time to publish, Steam and Itch.io will host a game and provide everything needed to turn ludological art into cold hard cash in exchange for a small cut.
We live in an age of opportunity. And that, ironically, is part of the problem. The change has been exponential, and it has come at the worst possible time. Over the last decade, video game developers have flooded the market – at an exponential rate – faster than the industry (from AAA publishers to independent studios) has been able to adapt.
In the wake of this flood, an economic nightmare scenario began to emerge: The COVID-19 pandemic created a temporary surge in interest that attracted misguided investments from video game outsiders and excessive spending from video game insiders. Venture capitalists were seduced by imaginary “high-ceiling” opportunities in blockchain, esports, and VR, rather than more established (but supposedly “low-ceiling”) studios developing traditional single-player experiences. And then, just as all of these bubbles were fully inflated, fears of a recession drove U.S. interest rates higher. Rates shot so high that they now appear to be stuck in orbit, meaning the average game studio or investor will be very hesitant to borrow money to finance a new project.
Voilà: the video game industry of 2024. Since January, industry leaders have been muttering the mantra “survive until 2025.” But I fear the long-term forecast is cloudy with a chance of shit.
If you can relate, think of AAA video game publishers. Where once a publisher’s individual games competed against a few dozen new releases a year, now they’re releasing dozens a week. (Plus subscription services, constantly updated free-to-play games, and the latest patches or expansions for the biggest hits of previous years.) These publishers grew big and made their name through a retail distribution system that cost a lot of money but denied newcomers access to the shelves of GameStop and Walmart. As profits grew, publishers opened studios around the world to develop games that became more sophisticated and expensive with each console cycle.
But things gradually changed. Valve launched Steam in 2003, creating an alternative way for a limited group of established game publishers to reach their fans without having to bear the upfront costs of distribution. A year later, Microsoft launched Xbox Live Arcade, a curated digital distribution service that celebrated hand-picked, smaller, often independently developed games. By 2017, the dam had broken: all developers had the freedom to release their games directly on platforms like Itch.io and Steam with minimal obstacles.
Do you have a game? Do you not mind filling out tax forms? Then you are ready to go!
In 2024, those AAA publishers who once controlled distribution and audience attention have been humiliated. They share the same space as every other game available on Steam, Game Pass, or any other major digital store. The new Halo will be squeezed into the same advertising rectangle as the latest Vampire Survivors Clone, hentai visual novel, or indie darling that promises hundreds of hours of entertainment for the price of a cup of coffee. Imagine if the film industry’s primary distribution model was YouTube – the biggest films would swim in the same algorithmic ocean as student films, wedding videos, four-hour video essays, one-minute bloopers, and viral mush that begs the question “is this cake?”
To differentiate themselves in this market, AAA video game publishers have doubled down on efforts that have worked in the past: They’ve made their games bigger and more realistic. As development budgets soar, so do marketing budgets designed to provide some security to these increasingly risky bets. Higher costs mean higher sales goals, bigger games, and more intensive marketing to meet those goals, which in turn means higher costs. Snake meets tail.
Here is just one result of this ridiculous loop of one-upmanship: In May Final Fantasy 7 Rebirth was the fourth best-selling game of the year in the USA Good news, right? The management of Square Enix described the sales as a disappointment and the Shares fell the most they have had in 13 years. Simply put, a AAA game can no longer be a best-selling game; it must The
I understand that many in the gaming community have no sympathy for publishers struggling to survive in this new, theoretically more democratic era where everyone has access to distribution. But remember, a publisher is not just a bunch of rich executives; most of those affected by this paradigm shift are game publishers.
In 2023, video game studios laid off more than 10,000 employees. In 2024, the video game industry reached this grim milestone in less than six months.
To optimists (or anarchists), this turmoil may sound like short-term pain that could lead to long-term gain. The old structures that consolidated capital are crumbling, and with the bricks they create, independent creators will build a better and fairer future. But that will only happen if independent creators can find the resources to lay the foundations.
Indie game studios have benefited for years from readily available investment and upfront payments. New services like Epic Games Store, Xbox Game Pass, and Apple Arcade competed for exclusive rights; venture capitalists were willing to shower money on anyone who admitted they loved NFTs; and interest rates were low.
Today, all the oil has been sucked out of the earth. As my former colleague Megan Farokhmanesh wrote at WiredIndie video game studios are Also are struggling to survive in the current economic climate. The same core problem AAA publishers face – how do you get someone to care about your game when there are countless other options? – remains the same. And unlike publishers, most indie developers don’t have millions of dollars in savings to fund a safety net to weather this economic shitstorm.
So we have a AAA industry in trouble, with no reasonable plan for the future and losing thousands of game publishers every year. And we have an indie game investment ecosystem that is no longer willing to provide an alternative.
I can’t get rid of this quote from Farokhmanesh’s article:
“Survival to 25″ assumes that we are going through a long winter instead of burning our own crops three years earlier. If we don’t start planting differently, if we don’t start changing the way we work and think about game development, we will continue to experience the highest highs and the lowest lows that the games industry has ever seen. And it might even get worse.”
So what does it mean to plan differently? I believe this problem is bigger than any single studio, let alone a single person. For the industry to survive beyond year 25, many different approaches will need to be tried by producers large and small to find a replicable path forward.
Two steps to a sustainable games industry
I would like to contribute some ideas to the discussion.
For indie studios, I am happy about funds that help indie studios to survive this time, especially Outersloth, a fund from Among us Developer Innersloth takes a “recoup and share” approach – that is, it tries to recoup its investment and share revenue. Of course, that assumes that the games will recoup their investment – a feat that most video games fail to achieve.
This is where expertise is just as important as money. With investment becoming increasingly difficult to come by, it’s more important than ever that the heads of indie game studios learn the intricacies of running a business. The industry needs better mentoring and training programs. And universities with expensive game development degrees need to make business a mandatory part of the curriculum. We can’t keep telling artists that all they need is a great idea; that’s simply not true.
And to AAA publishers: break the cycle of scale! If every publisher’s goal is to have the best game on the market, I have terrible mathematical news. There are a ton of studios and only one best game. I can’t help but see the Marvel Cinematic Universe formula in the current AAA game development model, with executives addicted to past successes recreating replicas of replicas of exhausted franchises just waiting to be shipped off to some upstate farm. AAA publishers need to accept that the old dominance isn’t coming back. They need to act as part of the crowded ecosystem now, not as an exception to it. That means making more and smaller games, diversifying portfolios, bringing new IPs to market, and targeting underserved audiences.
The situation is bad. It could get worse. The boat is sinking and burning. Now someone grab a damn bucket, someone grab the fire extinguisher and, for heaven’s sake, someone else think about where the thing is going to sail. Because if the industry doesn’t find a solution, soon calm waterthis boat is sinking.
