This week's single biggest piece of news was the prevention of Microsoft's $68.7 billion merger with Activision Blizzard as the UK's Competition and Markets Authority blocked the deal, citing concerns over cloud gaming. Publishing its final decision in a 418-page report, the CMA's investigation contains a number of notable details, with the latest revealing insights into the ever growing costs of game development.
In its huge report, the CMA revealed that some major publishers claim their budgets for triple-A games can exceed $1 billion (via IGN). The costs associated with triple-A game development has been increasing exponentially and the details really hit home just how much is invested in these blockbuster titles. Those triple-A projects that are in development for launch in 2024 or 2025 can require development budgets of $200 million or more.
It is not outlandish. Call of Duty, for example, has exceeded $300 million in development costs while the next Grand Theft Auto will have a similar outlay. The recent The Callisto Protocol reportedly cost $162 million to make, while CD Projekt Red spent a staggering $316 million on Cyberpunk 2077, which recently prompted one of its quest directors to respond to comments that triple-A RPG development is hitting a wall. It is important to note that these costs, as high as they are, are merely the development costs and don't factor in the outlay spent on marketing the games.
According to CMA's report, one big studio reported that a major franchise cost $660 million to develop while marketing cost almost $550 million, meaning total budgets for triple-A games can nearly reach one billion dollars in total and even exceed that enormous figure. While it is not disclosed what this franchise is, it is not out of the realm of believability. It's been calculated, for example, that Genshin Impact might have cost its developer around $500 million to date. While these are vast numbers, that kind of investment is a drop compared to the profits HoYoverse achieves from the gacha title.
The CMA document also quoted from a market intelligence report composed by IDG that gained knowledge from a source at Activision. "We have to make so much content for Call of Duty that we can't even lean on one lead studio anymore," the Activision source said. "Now we need almost 1.5 lead studios for each annual CoD. That kind of bandwidth pressure is forcing us to use outsources more and more. I don't see that changing anytime soon".
All this should throw up questions regarding just how sustainable game development is. While triple-A games can earn their investment back, and more, it is a high pressure environment as they compete with each other while those games that fail to meet expectations can result in disastrous financial situations for their studios and publishers. Video games are a big business, that's for certain.