Video game budgets can vary wildly, and that’s because the scope of a game project depends on many different factors.
On the indie side of things, a game’s production budget may only be around $100,000 US if the team is small and the game itself is relatively simple.
Over in AAA video game territory (major studios creating first-party games), production budgets can range from around $15 million US to $150 million US for the biggest projects around.
Those are massive numbers, rivaling even major studio blockbuster movies from big Hollywood names.
In this article, we’ll walk you through some of the basic factors that help to answer the question, ‘Why are video games so expensive to make?’
For obvious reasons, we’ll be focusing on the production process of major AAA video games, since those are the games that require large budgets. As we already mentioned, it’s possible to make games for far less money, but these probably aren’t the games people are thinking of when asking the above question.
Let’s get started.
The AAA Arms Race
‘Arms race’ is a term that refers to historical instances of competitive spending on military technology. If one country makes major advances, other countries in direct military conflict with the first country will try to keep up by making advances of their own. Any mismatch perpetuates an endless loop of spending and development.
Among AAA video game studios, publishers, and platforms, there is an arms race of a very different type.
Graphics and performance may not be the most important aspects of a video game, but they are aspects that are very easy for potential customers to notice.
Companies at the forefront of the industry don’t want to look outdated or cheap when compared directly to the competition, as this could significantly damage sales and brand image.
So these companies have been spending more and more to keep up with the competition. If you want your game to have top-tier graphics, design, and performance, you’re going to have to spend quite a bit of cash.
Video games and their underlying systems are only becoming more complex, and skilled developers and designers are highly sought-after, fetching larger and larger salaries along the way as they field offers from different companies.
If one studio spent $100 million US to create a popular, cutting-edge game, then a direct competitor will need to spend the same amount or even more to meet or exceed those results, depending on the specifics of the development process.
AAA video games require large teams, in the neighborhood of 70-100+ people. In addition to salaried employees, a studio might also need to hire contract workers to meet a deadline or iron out a problem.
Also, the average salaries for key roles in game development tend to be quite high. For example, the salary of a Game Programmer can be anywhere from $45,000 US per year to $130,000 US per year, and that doesn’t account for additional bonuses common in the industry, or for the costs of providing employees with benefits.
In addition to long-term staff members, game studios also need to hire voice acting talent and composers.
And keep in mind this doesn’t include basic business expenses required to facilitate any of this work, which is our next point.
Overhead refers to the basic expenses that need to be paid each month just to keep the doors open.
Many AAA game studios opt for office spaces where their employees can work on-site, as opposed to managing a large staff of remote employees, which can pose many more logistical challenges.
Depending on location, office space can be quite expensive, and the price of a specific office space might even increase over time.
Then, that office space needs to be filled with high-end technology. Then, the office needs to have top-grade security so that all this valuable equipment doesn’t get stolen or damaged.
On top of all that, studios often use existing development tools and software rather than creating their own, so this means buying or licensing various pieces of software, including, for example, game engines and physics engines.
These costs can really add up, and they can inflate a budget quite a bit when the development timeline doesn’t match expectations, but we’ll be talking about that later.
Marketing is essential for major AAA games, and returning to the arms race analogy, other studios spending a lot of money on marketing means that other studios in the same category will have to spend roughly the same amount or even more to attract similar amounts of attention.
Yes, it’s possible to spend very little money on marketing and still reach a large audience. For example, a simple trailer could go viral, attracting attention that might otherwise have required millions in marketing spending. But large studios can’t rely on happenstance to get the word out on their game.
When we include indie and mid-tier games, there are simply more games being released each year than ever before, and spending large amounts of money on marketing ensures that your game will have higher name recognition.
It can cost millions to advertise a game on television or on major social media platforms.
Marketing might also include sponsored content with content creators and streamers, the rates of which vary based on the reach of each creator.
Extended Development Timelines
So those are the main factors that contribute to video games costing so much money to make, but there’s one final, compounding factor that can inflate a budget even more: time.
Generally speaking, big AAA video games take between two and four years to complete, and even after release, the team will probably still need to work on bug fixes and updates, or maybe even DLC.
As we mentioned earlier, video game development is incredibly complex. There are many different departments and moving parts, and employing a large staff adds communication and prioritization to the list of challenges.
You’ve probably heard about delays in game development. These are actually quite common, both for indie games and AAA games.
In fact, Cyberpunk 2077 was delayed three separate times before finally releasing in december of 2020.
Psychonauts 2 was also released years after its initial expected release window.
Based on all the recurring development expenses we’ve talked about so far, you can guess what happens to a game’s budget when months, or even years, get added to the development timeline.
This puts studios and publishers in a difficult position. An unfinished game can’t be released without damaging consumer trust, so the only option is to keep spending more and more until the game is actually finished, or at least close to being finished, as was the case with the aforementioned Cyberpunk 2077.
Please keep in mind …
Before wrapping up, it’s important to note that AAA game studios with close ties to a publisher or platform holder means the studio won’t have to cover all these expenses by themselves.
For example, if a platform holder like Sony has purchased the exclusive distribution rights to a game (these are referred to as platform exclusives), they will probably provide the studio in question with the funding they need, and they might even cover the marketing costs for the game.
Independent studios, on the other hand, have much less wiggle room. If they go over-budget, they need to find additional financing, perhaps by making a deal with a publisher or platform. If they can’t find the financing, then the game will be released prematurely or be canceled outright.
Looking to the future, it’s likely that major AAA games will continue to see budget increases. Even so, highly efficient studios may be able to create games of a similar quality without spending nearly as much as industry leaders.
Video game budgeting is complex, but we hope this article has given you a glimpse into why video games are so expensive to make.