“Skull and Bones” is set to be middling with a mediocre reception. “Kill the Justice League” has been received with mixed reactions from the community, being called bland and repetitive in reviews. On the other side of the coin, games like “Palworld” and “HELLDIVERS 2” have become sudden successes, selling millions of copies and making hundreds of millions in sales. But what’s causing these smaller studios to succeed and the industry titans to trip? Let’s take a gander.

Games take a lot of resources to make. Time, developers and money. But how much money does a game have to make to break even? Spoiler alert: It’s not just the development budget that needs to be compensated for. We have to consider the marketing budgets as well. A safe assumption for a game’s marketing budget is that it is 25% to 50% of a games development budget. For example, a game that cost $100 million to develop would likely have a marketing budget of around $25 million to $50 million.

Now, let’s look at some specific games.

In order to break even, game studios need to not only make back their development budgets but their marketing budgets as well in order to turn a profit. Pretty simple concept. “Palworld” cost $6.75 million to make. This would put its marketing budget between a conservative $1.68 million and liberal $3.37 million based on our previous scale of 25% to 50%. On the high end, this would mean “Palworld” would have to make about $10.12 million to break even. 

And while “Palworld” has more than passed this mark, others have not.

“Kill the Justice League” made around $3 million in its opening week, not including pre-orders. Not bad, right? Well, this game was made for well into the tens of millions of dollars, as most games of this caliber, triple A or AAA, cost in the ballpark of $50 to $100 million to make. With that in mind, it’s not surprising that during an earnings call, Warner Bros. Discover CFO Gunnar Wiedenfels said, in an article by Den of Geek that “Kill the Justice League” had fallen “short of our expectations.”

No kidding.

With this in mind, it makes you wonder: Why? Surely you have heard some theories. Some people say it’s because the games aren’t very fun. Others call out pandemic-era bloat that can’t be sustained any more. Some think it might be consumers suffering from the infamous “superhero fatigue” or other social phenomenon. Well, here are my thoughts.

All of the aforementioned possibilities are true, and the big studios are failing to innovate.

Adaptation and innovation is what got humanity to the point where we can sit at computers and play video games all day, and those who continue to innovate and adapt continue to succeed. We have seen that in other industries too, especially those driven by entrepreneurship. Games studios need to do the same to keep up with the constantly changing player base, and it seems smaller double A, also called AA, studios are managing to do so where the AAA giants are failing. But this might not be a bad thing for the industry. 

In fact, it’s likely a good thing.

What we are seeing is a cycle that has existed throughout history, be it the rise and fall of empires, the creation and then obsolescence of technology or even the cycle of life and death itself. The video game industry is changing, with the elder titans falling into stupor and young, fresh contenders surpassing their forebears in a cycle that will inevitably occur again and again. 

But for now, all we can do is sit back and wait to see what the energetic newcomers and existing elders come up with next.