AAA Math Is Broken

Hey,

The games industry is spending more money than it ever has, on the biggest teams it's ever had, over the longest timelines it's ever had. And it's working less than ever.

If you're building or leading in this world, you can feel it. You hit every milestone and the game still doesn't come together. I think almost all of it traces back to one thing: studios running a playbook the world left behind.

Let's look at the math.

Twenty years ago, a AAA game cost around $20 million to make. If you sold a million copies at 40 or 50 bucks, you'd made your budget back. If you sold four or five million, you might 10x your money.

That one hit could pay for a publisher's entire slate. Fund ten games, watch one or two hit big, a few break even, and five to seven not make it back. And that was fine, because the hits carried everything.

Now run the same math today. The game costs $200 million and sells for $70. To return 10x, you need to sell roughly 30 million copies. Almost no game on earth does that. Even a genuine hit at five million copies only gets you to $350 million, and once you account for platform fees and marketing on a $200 million budget, congratulations, you're breaking even and a little extra.

And no, this isn't just inflation. Inflation takes that $20 million game to about $35 million today. It doesn't take it to $200 million.

Here's the part that makes it worse: while all this happened, the hit rate went down, not up. The market is more saturated than it has ever been. Players have more games, more platforms, and more free things competing for their attention. So if a hit used to come 1 in 10 and now it's more like 1 in 15 or 20, your hits return 2-3x instead of 10x, and they have to fund MORE attempts at a hit.

The math just doesn't play out.

This is why you see AAA retreating into sequels and known IP. They can no longer afford seven non-viable products, because that's potentially $1.4 billion flushed down the toilet.

But the economics are only the visible problem. The underlying problem is that the business reality changed and the thinking didn't.

Somewhere along the way, AAA decided the hard part of making games is building the game. If you get enough experts who can make the assets, write the code, and build the pipelines then you'll have a good game.

That belief used to be a bit more reasonable, though it was never as true as some might believe. But engines were hard to come by. Toolchains were rough. And the market wasn't saturated, so a cohesive, functional game was "fine" and "fine" got bought. You paid for shelf space at GameStop or Electronics Boutique or Walmart and people literally picked the box up and then paid you for it.

That world trained studios to focus on making stuff. But "fine" is no longer good enough. Players can cherry-pick exactly the experience they want from thousands of options, and functional-but-unremarkable doesn't get traction anymore.

And a deeper point: the hardest part was never the stuff. The hard part is creating a compelling experience players will choose to engage with, and getting it in front of them so they know it exists. The whole has to be greater than the sum of the parts. Building great parts and hoping they add up is backwards.

You can see this mistake in its purest form in rockstar teams studios try to assemble. I've seen and heard of multiple experienced studios building a stacked team of A-players in every discipline, and believing that guarantees success. And every time I've seen (or heard of) it, it failed. Being great at the pieces of a game isn't what makes you win, even if it does help you win more.

The missing role here is product thinking. We too rarely had someone seriously asking: why would a player choose this? What makes it compelling? What's the smallest version we can build to find out? It's not that we didn't care, but we took a lot of this for granted. We've assumed designers do this. Mostly, they don't. Designers make sure the pieces come together well, which matters, but it's not the same as thinking about the product in an audience-centric way.

And when you value expertise over the ability to relate to the player, you get confident, expensive mistakes. 

There's a second layer under all this, and it's the one I care most about. Management replaced leadership.

Management is maintaining and optimizing existing systems.

Leadership is influencing others toward a goal.

AAA turned its producers, its discipline leads, most of its so-called leaders, all into project managers. Collect the statuses, keep the plan moving, hit the milestones.

A manager says: here's the plan, I'll keep everyone on track.

A leader says: wait, even if we do all this work perfectly, we're still in trouble, because we haven't solved the core problem with the experience. We have to fix that, even if it disrupts the plan.

A production director I talked to described this very thing to me.

Every incentive in his system said "hit the next milestone!" ... then the next, then the next ... so he did. He only realized at the end that he'd been so focused on hitting milestones, he never stopped to ask whether the game was something anybody would want to play. He walked down a long line of milestone successes and looked up to find the game wasn't good.

And when a real leader does show up and point at the problem? The culture ejects them. They're a troublemaker. Confrontational. Negative. They get told, "We know how to do this, it's worked before."

Meanwhile, nobody can pull the rip cord on a game that isn't working, because everyone's job depends on convincing the funder it will work. The people most able to notice and say "this isn't working" are the ones who get fired for saying it.

If there's a through-line to all of this, it's that game development got to where it is without ever really encouraging two things: genuine leadership, and genuine product thinking. We told ourselves our producers were doing the leadership and our designers were doing the product thinking. In isolated cases, that was true. But across our industry? Definitely not.

So what would I actually do differently? Four things.

First, encourage and hire for a culture of real leadership and real product thinking. You want people whose default stance is to ask annoying questions: is this going where we wanted? Does anyone actually care about this? Should we even be doing this work right now?

Second, actually figure out your vision. Leaders can't influence toward a goal that doesn't exist. Anyone on your team should be able to say not just what they're building, but why a player will care. If they don't have a vision, they can't make local decisions in the interest of that vision.

Third, don't scale too early. A 10 person team learning for a year is insanely inexpensive next to an overscaled team of 80 pivoting late. Learn while pivoting is still cheap, THEN scale.

Fourth, value the player. Get in front of them early and often. Indies know this. Modders know this. Too many AAA studios have too little contact with reality, and trust me, you have the money. You're already spending it on overscaling.

None of this is a talent problem. AAA is stacked with talent. It's a thinking problem and a culture problem, a holdover from a world where building a cohesive game and shipping it was enough. That world is gone.

This is solvable. People are solving it. But it requires cultural, leadership, and product-approach changes that are uncomfortable, and for some, a slow and familiar decline into obscurity is a nicer safety blanket than the emotional cost of change.

Don't be that studio.

Talk soon, 
Ben C.

P.S. I went deeper on all of this in my latest episode, including the two traps I didn't cover here and what happened with Concord. Watch here: https://youtu.be/Zx5X7eXlItQ 

P.P.S. If this letter felt uncomfortably familiar, these are exactly the problems I help leaders work through in the Game Dev Leadership Accelerator. Get direct feedback from me on your specific situation, built for game dev.
Take a look and see if it's right for you: https://www.buildingbettergames.gg/leadership-accelerator