Former Sony executive says that focusing on blockbuster games is 'a death penalty' for the gaming industry

Shawn Layden, former PlayStation executive, gave a grim diagnosis of the state of the gaming industry at Gamescom Asia: AA studios are gone, and the rising costs for development have led to a creative death spiral in the industry (via GamesIndustry.biz).

Layden stated that in the early days of the games industry, "we spent more time looking at games, and we didn't ask 'what is your monetisation plan', 'what is your recurrent income plan', or even 'what is your subscription formula?' We asked a simple question: Is it fun? Are we having fun? If you answered yes to these questions, you would usually get a green signal."

Since then, however the costs of AAA games have risen exponentially. This has created a risk-averse environment in which publishers are reluctant to back anything they don't consider a blockbuster hit. "Back then, you didn't have to make a million dollars worth of games. Your risk tolerance was high," Layden said. "Today the entry costs to make a AAA game are in the triple digits of millions." I think that risk tolerance naturally drops.

Layden called this "collapse of creativity" a result of the plummeting risk-tolerance in game development. Layden said that "you're looking for sequels and copycats" because the finance guys draw the line saying, "Well, if Fortnite can make this much money in a certain amount of time, then my Fortnite knockoff could make this amount of money in a certain amount of time."

Layden says that the relentless push for AAA development trends has destroyed a middle ground between big-budget studios, and indie developers. "That middle layer, where Interplay used to make their money, Gremlin and Ocean, THQ and all those companies... That middle piece has gone." Layden said that if you [can] become AAA, you will survive. Or if you can do something interesting in the independent space, you will also survive. "But AA has gone. I think it's a danger to the ecosystem."

I think Layden is right about the spiraling costs of game development causing a creative stagnation for AAA games. But I would argue that AA titles aren't dead, as the former console executive may think. And Steam provides all the evidence anyone needs. It's not that mid-budget games are in a better position. They have to compete against both the high-cost tech of their AAA counterparts, and the lower prices of smaller-budget independent games. In some cases, such as Larian's Baldur's Gate 3 game, upgrading to AAA production values led to a new level in success. Sometimes things don't work out so well. In the case of Shadowrun developer Harebrained Schemes the failure of The Lamplighters League led to major layoffs and the split from Paradox Interactive.

We can see that AA success in the middle ground is still possible, as we have seen with recent releases such as MechWarrior 5 or Frostpunk 2. Or any number of farming simulators, 4X Grand Strategies, and survival games.

While I am a little more optimistic about the state the AA market, I share Layden’s hope to get "a bit of interest, excitement and exposure" from unconventional, low-budget game projects. Layden said, "If we rely solely on blockbusters for our survival, I think it's a death penalty." I'm inclined to agree, considering what happens when these blockbuster bets don't work out.

Layden made it clear that AI is not the answer to the industry's problems. Layden said, "I find all this excitement about gen-AI kind of funny." "I can see its application in certain places and for certain things. It's a tool and not a salvation. It's like Excel, a tool. It helps you speed up your tasks."