How We Got Here

Read Time: 5 Minutes

Game development is in a tumultuous state. 

There’s no shortage of articles and posts about layoffs, failed products, and studio shutdowns, as well as speculation about what the future holds for us all.

Today I want to look at why I think the industry is where it is, and also what we can learn from it going forward. Too many takes on the industry attempt to boil things down to one or two variables. 

Let me get the caveat out of the way first: I am going to miss stuff, and I’m probably wrong about either the size or impact of the issues I’ll bring up. I certainly don’t know all the variables. 

Nevertheless, here’s my take on the recent history of game dev as we head towards the end of 2024.

The Variables (...some of them)

Big, “Obvious” Stuff

• COVID had a huge impact on games

• AAA development is getting more expensive

• Layoffs mean that tons of talent is available for companies hiring

• Mobile Changes (IDFA, etc.)

• Web3, NFTs, Blockchain, P2E, etc.

• Gen “AI”, or really LLMs

Less Discussed Stuff

• AAA development is taking longer

• Game making and game supporting tools/platforms are easily accessible

• Way more games are being made

• Roblox and UEFN

• Interest rates and resulting changes in capital investment

• Investors with little understanding of game dev

• Changing player shape and need

• Narrowly targeted hiring reqs

• Decline in effectiveness of traditional marketing

• Incumbent products lasting for years or decades

• Macroeconomics

• Trend chasing

• Remote Work

• Conflict between players and developers

Rarely Discussed Stuff

• Different incentives between Publishers vs Investors vs Game Devs vs Players

• Growing numbers of college grads with gaming degrees

• Company brand and reputation-based decision-making in hiring

• Company-based hiring in funding

• Spike in startups in 2020 and 2021 now needing more rounds to continue

• Less “taste-making” through standard media like IGN, Gamespot, etc.

• Overly optimistic leadership

• Unhelpful focus on the process of making games over the purpose of making games

• Challenges to publishing in certain areas or countries of the world

• Discoverability of products in a perpetually red ocean

2019 - Where We Were

Towards the end of 2019, gaming had established itself as an “up and to the right” industry. 

While some studios were still shuttered after failures or because they didn’t align with the parent company or from just running out of capital, it was actually a relatively stable time to be a game dev. One might have even argued that we’d matured within our niche of tech/software dev, with large companies and stable jobs being more common than they’d been in earlier decades.

In the mobile landscape, some companies making games had almost become factories with known metrics. The game felt less important than the marketing apparatus you would hook up to it, and strong product managers from mobile companies were amazing at finding ways to plug their games into a machine where things like CPI, retention at intervals, DAU, ARPU, LTV, and etc. could be tinkered with to create a positive ROI - please don’t misunderstand me as saying this was EASY. But it was repeatable and reliable, and mobile was generating the biggest chunk of revenue by a long shot across game dev. (It still is.)

Tools were also more accessible than they’d ever been. Unreal, Unity, and GameMaker meant that you rarely needed to build your own engine any more, and also that people with little experience still had a chance at making compelling content.

Across every platform, entrenched live service games like Counterstrike, World of Warcraft, Fortnite, Call of Duty, World of tanks, Warframe, EA sports franchises, Clash of Clans, Candy Crush, The Sims, League of Legends, Apex Legends, and more seemed able to endure well beyond the traditional lifespan of a game. They didn’t just make some basic ROI soon after launch, they continued to return more than they cost well into the future. 

From an historical lens, it was a good time to be a game dev. Then COVID happened.

2020 - Early 2022

Over the next few years, the macroeconomic situation got … strange … with artificially low interest rates protecting nations during a time of low economic activity/growth. Meanwhile, people were spending more time alone and at home, both of which led to a spike in game playing. With less time spent outside or with other people, individuals who were in decent financial shape were more likely to spend their discretionary funds on gaming vs other things.

Scaled remote work became real. This changed the way work got done, but also enabled developers to relocate and easily move between jobs or form companies with whoever they wanted anywhere in the world. Many startups were born, and with the still insanely low interest rates PLUS the seeming spike in profitability of games you had investors who knew little about the industry willing to invest millions into it.

Into this fray entered Web3, the new way people would interact with each other. While the term was coined years before, it seemed like the “internet of things”/metaverse was almost here, and in game dev too! Many words were tossed around, but there was a huge amount of FOMO about this from investors across the board. A SHOCKING proportion of the total investment into game dev and startups went to studios that had (or claimed) some connection to Web3 despite little proof that it made games more appealing to players in any way - something that left the majority of experienced game devs skeptical.

Right on the heels of Web3 getting big, Generative “AI” or LLMs started to become popular and were able to do some surprising things. Whether viewed as a copyright infringement, a potentially helpful tool, or a change to humanity forever, people learned about it and started reacting to it at scale. And similar to game pitches containing “Web3,” now you could also probably snag some funding by having something related to “AI” as part of your deck.

In 2021, IDFA (and GAID) became “optional” and many people turned/left it off, hamstringing the machines mobile companies had built to create profit. This was a serious blow to overall revenue, but being in the midst of the gaming boom and the upcoming revolution of “web3” powered gaming meant it didn’t slow down enthusiasm much.

Everything was wild. The devs held the power because of how easy it was for them to switch studios, studios wanted to hire like crazy to take advantage of the boom in gaming plus the high availability of capital to fund it, and not just Web3 but AI were pitched as things that would transform our industry to its very bones.

It’s worth noting here that the devs who seemed to hold the power were not all devs equally. Senior devs did amazingly well, but mid and junior talent were often pushed aside as senior people willing to work remotely were everywhere and paying them wasn’t a problem. The relative cost-to-benefit ratios seemed tilted in favor of those already established in the industry, while others struggled or sought to join far less stable studios they could get into. Part of this was the sudden availability of talent, while some of it was companies having no idea how to train someone remotely and choosing to rely on “proven talent.” This would have many consequences down the road.

In the midst of the chaos, releases were volatile. Many more games were being made, but huge games had faltered in timeline, largely blamed on the pandemic disrupting how people worked and their emotional well-being. Players started being more suspicious, with launch failures like Battlefield 2042 generating real ire in the gamer community. There were a lot of delays and quality problems, though hits like Zelda and Elden Ring showed that good products could still be made.

Leaders during these months trended towards uncontrolled optimism, even as dev costs skyrocketed and historically reliable processes for shipping on time seemed to falter. 

In many ways, things were great, but in some areas, it felt like we were redlining. I’ll throw my own opinion in here: one of the bigger challenges that we are still facing is the breakdown in the relationship between developers of games and the players who play them. You don’t want an antagonistic relationship with your audience.

Late 2022 through 2024

In multiple ways, from late 2022 through 2024, our industry took body blows.

The pandemic cooled down and things started to return to whatever the new “normal” would be.

Interest rates rose, drying up capital by altering risk profiles against alternative investments.

Web3 was revealed to not be the revolution in games that people had thought it might be. In fact, it seemed that most of the web3 stuff had been gamified speculation for crypto schemes/launches (depending on your view). 

Gamers and everyone else started returning to other activities. A fairly predictable drop in game revenue resulted, but despite its predictability it still seemed to take many companies by surprise. Everyone always thinks they’ll manage to get off just before everything goes south, and - just like many other times in history - most companies had overplayed their hand.

Established companies with established processes started asking if remote was still a good idea, with some demanding a return-to-office for their employees. This led to a second set of “negotiations” between devs and studios, but this time the studios held far more power.

Big releases kept dropping the ball. Quality at launch seemed unpredictable and players reacted with ever more caution about new products. And most gamers had tried and true long-term live service games to fall back on and play. If new stuff wasn’t great, old proven stuff was everywhere.

One result of this? Player skepticism towards development and publishing, and a further breakdown of the relationship between studios and the audience they claimed to serve.

Alright, let me take a break here… 

Next newsletter I’m going to talk about where I see various parts of the industry in the last few years, but this one is more about a reflection of the pre and post pandemic situation.

It’s been tough. Simultaneously, the underlying numbers are still up and to the right for game dev. The economy is looking somewhat better at least in the west. There is hope out there. 

My honest take though? We’ve still got a lot to figure out before we break out into a more stable industry again. I don’t think 2025 is going to be the year of amazing recovery. I’m open to being wrong about that, and actually hoping I am too.

Some takeaways from everything above:

• Don’t bank on 2025 being the year everything gets better. Many thought that about 2024, and things got way worse. I don’t know where the bottom is, and I don’t know how long recovery will take, but take care of yourself and those you love by assuming 2025 may be a continuation of 2024. If it IS a year of recovery, great. Don’t put all your eggs in that basket.

• The power dynamics between employee and employer have shifted. Don’t behave as if they have not. Whether it’s fair or right or whatever, it is what it is. Adjust your approach, recognize the new sets of tradeoffs, and make good decisions based on reality, not the ideal you wish was true. 

• Be wary of gaming trends. Think through the world you’re in. Web3 was very appealing to lots of people who don’t know much about games. SOME people who knew stuff about games did jump in, but usually with very different types of bets than the people who knew nothing about games. The majority isn’t always right, but it is worth taking seriously.

• For the love of all that is holy, please CONNECT WITH YOUR PLAYERS and don’t treat them badly, speak down to them, or act as though they are idiots. If you don’t understand them and recognize how they relate to games, you have a much lower shot of making one that succeeds.

That’ll wrap it up, see you in a couple weeks with a deeper dive into the last year or so for specific parts of our industry.

Whenever you’re ready, there are 3 ways we can help you…

—>Courses built by game devs for game devs - check out “Succeeding in Game Production” HERE.

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