Indie Games Power Up as Big-Budget Rivals Sacrifice Creativity to Profit

One of the most-hyped video games of the year was made by three people and sold for just $20 a copy. 

For eager fans, that price point on “Hollow Knight: Silksong,” a long-awaited sequel, was the gaming-industry equivalent of a Blue Light Special on a T-Swift album drop. The game, along with products from rival indie studios, contrasts starkly with so-called AAA titles, which can take thousands of developers and cost hundreds of millions of dollars to make. 

Some of the latest have retailed for as much as $80, four times the price of “Silksong,” a figure that sparked an uproar when Nintendo and, later, Microsoft charged it for new launches this year. The backlash points to wider challenges for the $189 billion industry, which has reached a crossroads as player growth starts to flatten after decades of expansion. Simultaneously, games and live-service experiences like “Fortnite” are making up a bigger chunk of playtime, and younger generations accustomed to free and low-cost games that make money from in-game transactions are upending the industry’s traditional business model.

Too Affordable?

The success of indie titles shows what one path forward might look like, perhaps helping the gaming industry rely less on resource-intensive blockbusters and leading to a golden age for ultra-creative, smaller-budget hits. That could be a 1UP for players, developers and the entire industry. 

While “Silksong” is considered almost too affordable, its three-person studio, Team Cherry, doesn’t need to charge more. Its production costs are easy to recoup, and the financial stakes are low: Team Cherry funded the first “Hollow Knight” game, in which the player pogos around as a tiny bug fighting to save a fallen kingdom, with a Kickstarter campaign that raised about $37,000. It went on to sell millions of copies, making a substantial return for its creators, and “Silksong” is following the same path. 

Games from major franchises like “Grand Theft Auto” and “Call of Duty,” meanwhile, need to make huge returns to justify their massive overheads. Even while charging $70 and $80 for games, companies including Microsoft and Sony have, in recent years, slashed investments in new, unproven concepts and laid off thousands of developers as they push for profits. 

AAA Is Playing On Hard Mode

Buoying the bottom line is a bigger lift, however, when lower-budget upstarts are generating most of the buzz.

Indie games developed by small studios swept the nomination categories for The Game Awards, a prestigious awards ceremony recognizing creative and technical innovation that garnered 154 million livestreams last year. Just two of the six contenders for “Game of the Year” at the early December event come from major game-makers, Nintendo and Sony, and neither’s a favorite to win. 

The frontrunner for gaming’s biggest award is “Clair Obscur: Expedition 33,” which won another major accolade, The Golden Joystick Awards’ “Ultimate Game of the Year,” earlier this month. Prediction market Kalshi gives the French game more than 70% odds of going two-for-two. 

These smaller-budget titles (“Clair Obscur” cost an estimated $30 million to make) have a built-in advantage because they’re under less pressure to succeed.

When games have $100 million budgets and up, studios are disincentivized to launch creative new games instead of their tried-and-true hits, Emmanuel Rosier, Newzoo’s director of market intelligence, told The Daily Upside. 

“Because the big publisher has so much pressure to be successful, they don’t take any chances anymore,” he said. “They release the next game within the same franchise, or they do a remake or remaster.” 

That doesn’t mean innovation can’t come from within those franchises: “Elden Ring,” an evolution of the “Dark Souls” franchise, won 2022’s “Game of the Year” award. Still, indie games are more likely to push industry innovation forward in daring ways, which Rosier noted is a primary purpose of these awards. 

Budget Busters

At the same time that indie games become more creative within tight budgets, major publishers are entering a vicious circle, becoming increasingly profit-focused and further sacrificing originality. Xbox-owner Microsoft set a goal of 30% profit margins, Bloomberg reported last month, well above the gaming industry’s average of 17% to 22% and Xbox’s 10% to 20% over the past six years. Before the new target, Bloomberg’s sources said Xbox employees were encouraged simply to make great games without worrying about finances. That was then:

• Microsoft has in recent years poured billions into its gaming endeavors, buying “Fallout”-maker ZeniMax in 2020 for $7.5 billion and “Call of Duty”-maker Activision Blizzard two years ago for $69 billion. Now, executives expect a return on their investments, especially as sales of the Xbox console fall far behind those of Sony’s PlayStation 5. Not to mention, Microsoft has shifted its focus and investments from gaming to today’s hot tech: AI. 
• This year, Microsoft canceled several games that had been in the works for seven or more years, including “Perfect Dark” and “Everwild.” Instead, Bloomberg reports that small-budget games and surer bets are taking priority over riskier projects. 

Rival Sony, meanwhile, still seems spooked by the flop of “Concord” last year. “Concord” was supposed to be the next “Call of Duty,” a multiplayer shooter game that Sony took offline within two weeks of its launch after it failed to attract players. One analyst estimated the game sold just 25,000 copies; millions is the norm for major releases. If Sony was hesitant to launch original games beyond its fan favorites before, “Concord,” which was rumored to cost hundreds of millions of dollars to produce, likely made the company even more wary. Sony quickly shuttered the studio behind the game and later scrapped several other live-service projects. 

Risk-Reward Ratio

Looking ahead, the gaming industry’s biggest blockbuster on the horizon is Take-Two Interactive’s “Grand Theft Auto 6,” which it’s been awaiting on pins and needles. Unlike “Concord,” “Grand Theft Auto 6” has the name recognition that comes with being a famous franchise, and it’s all but guaranteed to be picked up by millions of players just because of that. “To be able to pull $80 or even $70 from the players, it means you need to be best in class. You need to be the game that everyone wants to play,” Rosier said, calling out “Grand Theft Auto” as one of the franchises that has that pricing power. 

For publisher Take-Two Interactive, the long-awaited game is too big to allow failure. It was once scheduled for release this fall, but Take-Two said this month that it’s now planning to launch the game next November after polishing it to meet players’ expectations. Even though Rosier estimates that each month of delay costs Take-Two $10 million to $15 million, the risk of releasing a subpar game outweighs the cost of delaying it.

“Hollow Knight: Silksong” also arrived later than players expected, with Team Cherry taking seven years to launch the title. But the three-person team could take its time. “The ambition is probably more into the art form, rather than purely revenue-driven,” Rosier said. “They have no shareholders. They have no quarterly earnings and the pressure of the stock market.” 

Not Game Over: As the path to profit gets narrower for the world of AAA, more companies could knock off an A or two and create smaller, cheaper titles with less overhead. From a player’s perspective, that means more creative options that cost less. Major publishers, it might be time to pass the controller.