Stephen Totilo - Nintendo, Microsoft, Square welcome us to the era of fewer big video games

There are abundant signs that we have entered an era that will see fewer major new video games from big game publishers.

That transition has been especially clear in the past week, as one gaming giant after another is sounding the alarm about the increasing challenges of making the kind of mega-games they're most famous for.

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"The cost associated with making these beautiful AAA blockbuster games is going up, and the time it takes to make them is going up," Xbox president Sarah Bond said in an interview with Bloomberg last week, setting up a partial justification for the company's deeply unpopular closure of several studio in its ZeniMax group.

Whether shutting down acclaimed studios—especially one that just released an award-winning game—is a wise response to the problem is debatable, but Bond wasn't alone in articulating the trend.

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Consider this note from last week issued by Sonic-maker Sega Sammy as part of its financial results (emphasis added by me):

"Regarding the environment of the entertainment contents business, in the consumer area, the growth has plateaued due to ongoing inflation in various countries and regions, and other factors. In addition, partly because of rising labor costs and longer development periods, there is urgent need to respond to these changes in the business environment. "

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There's also Final Fantasy giant Square Enix, just this morning, reiterating the news that it recently canceled multiple projects. The company "will pursue a shift from quantity to quality," it said.

And there's Nintendo president Shuntaro Furukawa telling investors last week that "the process of game development will inevitably become longer, more complex, and more advanced."

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If you've played Nintendo's games for the last two or three decades, the reduction in software output tracks with the commensurate increase in graphical complexity and overall game scale of many of the company's Switch releases.

The Legend of Zelda: Tears of the Kingdom is far bigger than the Wii's The Legend of Zelda: Skyward Sword; the Switch's Pikmin 4 dwarfs the Wii U's Pikmin 3; etc.

Nintendo hasn't outright said it, but, without any visible decline in its development resources, it appears to be putting more of its people onto fewer games.

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Last June, Xbox game studios chief Matt Booty told me that the days of two- or three-year development cycles for big-budget games are over. "They're four and five and six years," he said. Booty pinned that on the challenges of generating the advanced graphics associated with modern platforms. "There are higher expectations. The level of fidelity that we're able to deliver just goes up."

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Amid this, the success of any one big game from a major publisher is all the more paramount, and the risk of failure looms.

"New releases tend to be met with either marked success or marked failure as players throng to a handful of major titles," Square Enix stated this morning in an assessment of the gaming industry landscape. It's been widely noted that many older games, such as Fortnite and League of Legends, just can't be dislodged these days by new contenders.

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What's a big company to do?

Last year, at least, Sega said it believed releasing more games would help its chances. (Unclear if they still feel this way.)

But more companies are choosing to cut costs, while trying to get their smaller number of games out to more people.

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Take Square Enix, which saw sales rise slightly but operating income plummet in the 12 months ending March 31, 2024, thanks to softer sales of console and PC games. It already jettisoned the studios behind Tomb Raider and Deus Ex two years ago and said today that it will "aggressively pursue a multi-platform strategy" for its big franchises, suggesting it's done with, say, making recent Final Fantasy games PlayStation-exclusive on console.

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What's a big company to do?

Last year, at least, Sega said it believed releasing more games would help its chances. (Unclear if they still feel this way.)

But more companies are choosing to cut costs, while trying to get their smaller number of games out to more people.

But it's also likely that another recent trend will become more prominent: Games made by the most agile studios will thrive. See the work of independent teams like Pocket Pair (Palworld) or the malleable design of Sony-published, Arrowhead-developed Helldivers II: work that the big companies can't—or won't—create themselves.

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