2024 was a pretty rough year for the video game industry. Even though there were some great games released last year, workers continued to get laid off at a higher rate compared to 2023, and studios were unceremoniously shut down—some barely got to see their game go live before poor performance ended the endeavor prematurely, others still shuttered even after releasing critically-acclaimed titles1. With the high monetary stakes, games now cost so much that a handful of sales missteps is enough to cause the industry’s financiers to pull their investments.
This Twitter/X thread details, from an insider’s perspective, how the game industry got here. This was back when Concord went offline only two weeks after launch, with the news that the studio was shutting down two months later. As games remain a hit-driven business, execs concluded that such a poor initial showing portended the eventuality that it would never reach the sales needed to recoup development and marketing costs and cut their losses early.
In fact, the business model of video games is starting to look like venture capital. That is, game publishers—which includes the major console makers, Sony, Microsoft, and Nintendo—invest in a portfolio of development studios, which produce a steady stream of titles for their platforms. Some are run intentionally as small, indie-like shops, but the big bets are placed on these AAA titles: they cost hundreds of millions to develop, then expected to recoup multiples of that investment amount, such that they can cover the costs incurred by other games that don’t garner the same levels of success. It sounds a whole lot like VC dollars chasing 10× or 100× returns, singular investments so profitable that they can make up for the lack of performance everywhere else in their collection of assets.
But it’s not just video games. Movies feature the same business model as video games and were the first to dip into the trenches of safe IPs and sequels, but for a couple of years, TV shows and series enjoyed a renaissance in both quantity and quality. Yet, for all the criticism that Netflix faced for producing and showcasing mediocre, algorithmically-optimized shows, their business has steadily grown as the rest of the industry is pulling back their budgets and taking less creative risks. Nowadays, both cable television and their streaming service counterparts are reliant on known actors and formulaic stories, taking safer bets even as they raise prices. Publishers of other creative industries—books, music, podcasts—follow a similar pattern.
And this extends beyond the media landscape. Moneyball is often credited for revealing the effectiveness of applying financial principles to baseball, and within short order, the same ideas are spread to all professional sports. I was reading Hoop Atlas a few months back, and the author pointed out astutely that the language of finance has been adopted into sports—athletes are referred to as assets, ROIs calculated, risks are quantified and mitigated or compensated, and trading players take on the same analytical rigor as trading securities2. This is particularly prevalent in the NBA, a league driven by its star players, where the drama off the court sometimes overshadows the games themselves.
Or consider skyscrapers and how they’re designed and built today versus that of a century ago. This article explains that the prevalence of the modern skyscraper as an obelisk of metal and glass is more than just about following a contemporary, minimalistic design trend; 20th-century ornamentations cost more to build and reduce the available views for paying tenants, and so the industry naturally followed the most financially prudent path in maximizing profits. Upon visiting Vancouver 2 years ago—once called the City of Glass with its prevalence of glassy condos—despite my fondness for the modern aesthetic, the density of very similar-looking buildings added to a sense of blandness to the luxury condos and offices around their downtown areas.
Taking a step back, it’s easy enough to lament that all these domains have become entangled with money and react with resignation and melancholy. More abstractly, these domains have used finance as a type of quantification, so that they transmute athletic abilities and architecture and digital fun into numbers on spreadsheets, which can then be optimized and decided with simple formulas. One reoccurring side-effect of these trends is the emergence of winner-take-all dynamics: when industries are subject to market forces, they tend to bifurcate, with a handful of major players on one end, and if we’re lucky, a robust set of very small players on the other. In video games, this is the juxtaposition of AAA titles with indies; in the NBA, superstars and role players.
Maybe this is just what a capitalist system instills into society: a relentless drive to quantify, optimize, and extract value, tallied in dollars and cents. But, against the odds, there’s space to deviate, to champion the unpredictable. The unconventional. And perhaps—the unprofitable.
Though in the latter case, the studio ended up being acquired by another publisher before they fully closed up shop.↩
In a similar vein, the introduction of legalized sports gambling is now shifting the linguistics of sports in that direction.↩
