Tim Sweeney: Industry faces worst crash since 1980s

The assessment comes from issue 428 of Edge, where contributing editor Alex Spencer interviewed nine experts on the state of the industry. Sweeney identified two primary drivers of the current downturn: internal dysfunctions, specifically the escalating cost of AAA game development, and external pressures, most notably a persistent shortage of hardware components.

“It’s an unexpected, severe disruption,” Sweeney said. He pointed to a massive wave of investment in building AI systems and data centres, driven by the belief that these technologies will play a transformational role in the global economy. Because the perceived economic opportunity is so large, these sectors are outbidding the entire entertainment industry for available components. “So we’re getting the short end of the stick, and the prices of RAM and storage are quadrupling, and not necessarily stopping there. We should expect there’s just going to be a continual supply crisis for all gaming-relevant hardware for the next three years. The only solution, I think, is going to be building massive new factories to meet the world’s capacity demands – and that will happen.”

The cost of development

The financial pressure on studios is not new, but it has accelerated. Playable Worlds CEO Raph Koster has warned about rising costs for two decades. “I think the first time I spoke about, ‘Hey, cost is going to kill us’ was in 2005,” Koster said. At that time, he concluded that the cost of game development increases by roughly ten times every decade.

Koster repeated this analysis in 2017, using data from 250 releases over thirty years, and found the same result. After adjusting for inflation, AAA game development for consoles or PC cost about $1 million in the mid-1990s, $10 million in 2005, and $100 million in 2015. Sweeney noted that budgets now reach between $250 million and $400 million.

Former PlayStation boss Shawn Layden argued that the industry must adapt its financial models to accommodate lower-cost development. “By which I mean: ‘It’s only going to make $50 million’? Well, OK. Let’s find a model where making $50 million is a good thing, not a bad thing. I think that’s where the future is going to come from – people moving into that space,” Layden said. He described financial resources as “the great constraint that never gets expanded.”

Layden also criticized the industry’s tendency to prioritize visual spectacle over narrative or experiential value. “Do you need to model an entire world that takes 45 minutes to walk across? If there’s not a reason for that – if it’s not pushing the experience or story forward – that’s just a party trick. You’ve spent a bunch of time – which means money – on something that doesn’t mean anything,” he said.

AI and team structures

Koster believes the only way out of the current crisis is a complete reset of the industry’s technological foundation. “Our industry is cyclical. Unless we hit singularity, a platform will come along that changes things,” he said. He argued that AI is not a platform reset that lowers costs. “AI is just a computer getting bigger, and so the gas will keep filling it [...] It is actually incredibly expensive, in the end, so most of the benefit flows upwards. AI is changing things very rapidly, and it also doesn’t matter.”

Former Tencent business development director Amir Satvat discussed how AI is affecting team sizes. “A game that’s been made by one or two people, that’s great,” he noted. “But I’m more interested in what would have been a 50-to-60 person team becoming a 20-person team, and the 400-person team becoming a 100-person team, as people are trying to find more efficient ways to do things.”

Satvat suggested that the reduction in team size is often driven by the belief that AI tools can replace human labor. “That phenomenon of the 50-person teams becoming 20, I think the reason a lot of people are doing that – or believe they can do that – is because they have all these tools like Claude,” he said. However, he questioned whether these tools actually provide a measurable productive gain. “I’ve seen firms that made staff reductions because they thought they could, due to AI, and are now realising that they cut too many people and are hiring back.”

Satvat stated that staff cuts have hit the UK, northern and western Europe, and North America the hardest. “I think this is as bad as the '83 crash if you’re a game developer based in North America or western Europe, in a traditional AAA studio. That is ground zero for destruction,” he said.

The experts interviewed for Edge magazine present a picture of an industry under significant strain, with rising costs, hardware shortages, and the uncertain impact of AI on workforce and development models. The consensus is that the current crisis is not a temporary blip but a structural shift that will require fundamental changes in how games are made and funded.