Why Can't Studios Succeed


Curious why aren’t there more studios (animation, film, game, etc). Lack of investment? There definitely isn’t a lack of talent.


Money makes the world go around, makes the world go around… :wink:

Money. It’s probably that simple. Suppose that you’re running a micro-studio of about 10 people. Tiny. Do the math.

  • Everybody’s drawing the same $65k; Just throwing a random number out there. From concept to release, your first project is projected to last 24-36 months. Just to make payroll, you’re going to need to have $1.3M - $2M on hand.
  • Office space can easily run $125k-$250k for about 3,000sqft. That means, over the course of 3 years, you could be paying an additional $375k-$750k
  • Utilities, recurring supply costs, and basic overhead? You might be paying out for the equivalent of an 11th and 12th person. Over the course of 3 years, you might pay another $150K+.
  • Everybody’s going to need their own workstation and furniture. The art team is especially going to have some special requirements. My home office PC and personal work area, upgraded last year, set me back by about $10k. Even if the average cost ends up being half that, you might end up spending $50k just getting everybody up and running.
  • Of course, you’re game is going to need to be marketed and distributed. How much you spend here can vary. However, I’ve seen numerous film studios spend an additional 50% above production costs. So, hypothetically, if you’ve got a “skinny” production budget of $5M, it might not be unheard of to spend an additional $2.5M.
  • Naturally, pre-production can involve a lot of research. In some cases, that’s just about people sitting around brainstorming and hitting the white board at roundtable meetings. In other cases, however, this research phase can be much more involved, including off-site trips for photo shoots, ideation/inspiration, scouting, and so on. The more exotic this “research” phase, the more you might end up spending. Even if your game is just about gorillas, you’re unlikely to just Google “gorilla” and be done with it. You might not do more than spend a week trolling the zoo, but that still has to come out of the budget.

For this tiny 10 person team to operate and produce over the course of 3 years, it might end up costing $5M just to get the project out of the door. You might be able to do it for a fraction of that price, but compromises will be made. NOW, just imagine a AAA production like “Deus Ex - Human Revolution” and the like. Look at the credits. There were something like 500 people involved over the course of that production.

Want to turn a profit? Good luck. State, local, and federal taxes might eat upwards of 50% of your gross income. From there, you’ve got digital distribution to worry about. They can take an additional 10%-30% of that same gross. Using a 3rd party engine? Get prepared to shell out another 5%. The more licensed tech you use, the less you earn. You might only take back 10%-15% as your net.

So, using the above example of a $5M budget, you might have to earn $50M just to break even. That’s why the prospect of opening a studio of any size is so daunting.


Thanks Cookepuss,


For gaming what most people think of a a studio are mostly gone. Mainly studios are very small companies that make phone games on the cheap where they might piece together a couple of million and last for a run of one or two games then disappear. Was in gaming a long time and this is true back in the day, and also still true is that the top 15 games make 80% for all profit. Plus a big one is if a company can produce more than 1 hit is rare. Designing a good game is nowhere near as easy as many would have you believe.
I am here in the U.S. where government records put 3D artists, all sectors at around 7500 jobs expects the field to drop to around 5500 in 5 years due to AI and software changes.
Lastly the way companies work nowadays has changed. You don’t make your money from sales but off of your stock meeting ‘street’ expectations. This had lead to many companies now going to contract workers, no benefits and you can be dropped at anytime to bring spending into line to help meet those expectations. This is again true of many businesses.


I get what you’re saying, but that’s a gross oversimplification of the situation. It neglects the core issue of market segmentation and the differences between core and casual gamers. It also ignores the fundamental business models that keep each going. If what you’re saying were 100% true and accurate, both the console & PC markets would’ve been obliterated ages ago. It’s more complicated than that.

Those micro-studios to which you refer are largely the ones creating cheap or f2p phone games that subsist largely on addiction gaming and microtransactions. They can produce games inexpensively and rely on the same core template because they’re not selling a game. They’re feeding an addiction. You’re looking at digital crack dealers who make 99% of their money off of 1% of their user base.

Regardless of how they monetize, those micro-studios serve an entirely different sort of gamer. They’re looking to the woman on the subway train on her way to work. They’re looking at that guy waiting for his laundry to dry. Hell. They’re even looking at that kid in detention and the grandma looking to pick him up. These designers are reaching out to the broadest possible user base with the least amount of play time. They’re creating disposable experiences of 10-120 minutes.

Cell phone game design is the way it is, not just because of the user it serves, but also because of the persistent limitations of cell phone hardware and architecture. You’re never going to see a fully realized Witcher 3 on your iPhone because the screen is small, touch screen can’t replace a keyboard or gamepad, and the hardware itself will always remain many steps beyond systems designed for that purpose. I’m not sure that you can compare them to what’s going on in the console or PC realm. Those are two entirely different things.

Your comment is well taken, but (imo) misguided since it ignores the 250+ million current gen console/handled gamers and 1.3 billion PC gamers out there. That’s 1.55 billion gamers who identify exclusively as PC, console, or 3DS-type gamer.

To put that in perspective, including all known platforms, there are an estimated 1.8 billion gamers worldwide in total. That’s the figure. Strip out the PC & consoles/handhelds from that 1.8 billion total. Of those remaining 250 million gamers, only 180 million of them are actually mobile phone gamers. Those are real statistics. In 2019/2020, mobile (phone) gaming only represents a measly 10% of the entire market. That’s it.

So, when you’re suggesting that the old paradigm is dead and that most studios are just tiny operations, barely larger than what they did in the 1980s, that’s not actually true. 90% of all gamers identify mainly as being something other than a mobile/cell gamer.

Think about that for a moment. Think about how that relates to mobile/cell gaming. In 2018, of the top 15 selling games, every single one of them were on console and/or PC. Those micro-studio cell games don’t even break top 25.

Ask yourself another thing. Why are the top 15 games such money makers? The answer… They’re either sequels or part of established franchises. In 2018, the top 15 games moved at least 180-200 million units, or an average of 12-13 million units per title. OF COURSE they’re going to make the lion’s share of profits. Top 15 ranking and all sequel/franchise titles. Duh.

Let’s put that in perspective though. Probably 95% of all games AREN’T sequels or franchises. They have no installed user base. When you’re the 3rd entry in a series like Deus Ex Human Revolution, you can sell 2.2 million copies in 4 months. When you’re the very first entry like the original Deus Ex, however, it takes you 11 years just to break that 1 million mark. That’s all about brand recognition. With digital becoming the norm, it’s harder to be seen. On the plus side, you’re not fighting for shelf space (as much). Had the original Deus Ex been born in the Steam age, it wouldn’t have taken anywhere close to 11 years.

If you’re an indie developer or mid-sized studio, no, you won’t sell the 90 million units and make the $6 billion of a GTA V. That’ll never happen. Nobody knows who you are. Nobody cares. Especially true if you’re hawking your first major title.

Here’s the thing about Steam charts and why they’re flawed. When you look at the average sales of all games on Steam, the numbers aren’t very encouraging. The average game on steam sells only 37k units. That’s dismal. Worse yet, it’s down from 50k from only a few years ago.

That 37k number is crap though. Steam has no way of weeding out the shovelware. They have no way of separating the $1 crap that took a guy 2 months to make from the $40 title that took a small team 2 years to create. If the average unit sales is down from 50k to 37k then it’s also because the amount of shovelware is up.

The good thing is, however, once you manually filter out the shovelware, the numbers become much more encouraging.

Everybody wants their game to be the next Minecraft and sell 175mil copies. Obviously, that’s not realistic. AT ALL. Still, there are a LOT of games that sell 200k, 500k, or even 1mil copies in the first 3-12 months. These developers end up earning millions of dollars, yet consistently fly under the radar. Nobody ever hears about them or ever will. They live in the shadow of the top 15.

You might not be the Michael or Janet of the Jackson family, but being Tito or Latoya doesn’t mean that your begging for change on the street either.

How you interpret these figures all depends on your perspective.

Your game sells for $40. It took your 50 person team 36 months to make. Each member averaged $60k/yr. Your game sells 500k copies. On the surface, looking at the gross only, you’ve made a massive profit. Looking at the net, unless you’re also selling DLC, season passes, or loot boxes, your shop is going to close because you couldn’t earn back your budget. If, however, however, the same game is made with 1/2 the people and sells the same number of copies, you’re profitable and live to see another day - without a supplemental revenue stream.

The perceived strength of your earnings and sales figures depends as much on your budget as much as how much you actually sell. In that sense, you make a good case FOR micro-studios - even though you erroneously place them in the mobile sector.

Personally, I don’t actually think that there are many real AAA studios out there. Most of what we know to be AAA are mostly publishers. A bunch of AAA games come from lesser known studios, but published under AAA labels. Not as many AAA publishers develop their games in-house as they used to. These big publishers end up absorbing smaller developers or 2nd parties and/or option works from them.


So, yeah. The top 15 games make an obscene amount of money. Shocker! I’d never have thought that Mario had it in him. :wink:

YOU figured that 80% of all revenue is made by the smallest percentage of developers. That’s fine. The other 20% of that revenue? It’s being split up by legit non-AAA developers and shovelware hacks. It’s not unfair to suggest that 95% of this remaining 20% revenue is being made by the 5% of non-AAA developers who don’t traffic in shovelware. IOW, there’s a lot of shovelware out there clogging up the shops, but most it isn’t making much money. That’s why so few of them crack 20k units. Makes sense when you figure that quality usually translates to quantity. (There are some rare “bad” games that sell like hotcakes though.)

TO ME, looking at all of this, I can see why the sales statistics are all sorts of screwed up. Shovelware. There are a lot of people who are happy selling 37k copies of a $5 RPG Maker game that only took them 8 weeks to make. That’s fine. However, if you’re spending 24-36 months making a game and only sell 37k copies the you’re doing something very wrong. Either your game is total garbage, you don’t know how to promote it, or you’ve targeted it at such a niche market that only a few people will buy it. (I’m looking at you, Wolfenstein: Youngblood.)

While I would say that AAA developers have given way to AAA publishers, I’m not so sure that I’d agree that tiny studios are the norm either. They’re certainly more profitable, but not feasible given that 90% of all gaming takes place on large, high profile platforms.

The upside of being a good, non-shovelware small developer? Big console publishers love you. They crave you. They NEED you. Without you, their online shops would remain anemic.

Not sure if ANY of this makes any sense. It’s late at night (2:30am) and I’m rambling. :stuck_out_tongue: I might’ve been able to phrase it all better during the light of day. Oh well. LOL :wink:

I’m not sure who would suggest that it was. Seems like an odd thing to say. Anything worth doing is never easy.

Even bad Double Dragon clones take some skill to design and implement. Good design and implementation can take years. I’ve made a few games over the past 37 years. It’s not easy. Thankfully, I feel that the bad ones have prepared me for the good one I’m making now. My takeaway? Preproduction is EVERYTHING.

There’s no such thing as wasted work. That 200 pages of background prose you wrote in your design bible might not make its way into the game, but it’ll inform your design at every step. Those sketches that you never used might look different than the final designs, but they’re often recycled in some fashion going forward.

That projection MIGHT be accurate, but probably not for the reasons that you suppose. Over the past several years, certain sects the industry have been trending back to generalists over specialists. So, instead of creating a team of 30 people, they might be able to get away with a team of 15. It doesn’t necessarily mean more work or hours for everybody since the distribution of the load is being changed too. Having two artists who can, for example, model and animate is different than having a dedicated modeler and animator. It’s not the sort of pipeline that works for every studio, however. Larger studios might well prefer and benefit from the assembly line structure of a studio full of specialists.

Eh… You’re speaking for the largest portion of money, but also the smallest group of developers and publishers. Most developer or publishers aren’t publicly traded, held, or board managed. They do make their money off of sales.

The top tier that are traded or held, might only see sales revenue as a starting point. You’re correct. However, that’s not necessarily because of “street value” and trading, but because of the existence of multiple revenue streams that include various forms of DLC, microtransactions, merchandising, cross-platform/market promotion, advert sales, and so on.

Where, imo, you’re right is on the issue of perceived value. A game and its developer have good street cred and sales to the tune of $150mil, but might end up selling at a 3x factor evaluation due to predicted grown and investor buy in. 3rd party evaluation can drive up what would be an eventual sale price of this relatively modest endeavor to a larger conglomerate. It’s how nothing burger companies sell for a billion dollars. A good example here would be Marvel Entertainment, which was barely out of bankruptcy, yet sold to Disney for $4 billion.

It’s not how much an object is worth, but how much you can actually sell it for. I’ve got a gold ring that is probably worth $1,700. If I tried to sell it, I’d be lucky to get $400. On the other hand, I’ve got stuff that originally only cost $1, but might fetch a $150 price.

So, to me, when you’re talking about how some of these companies “make money”, I’m seeing the difference between perceived and actual as well as what the market will bear. Even then, as it relates to liquidity and operation, undervaluing the importance of actual revenue and productivity would be a HUGE mistake. It’s the difference between a Kim Kardashian and an Oprah Winfrey. You can sometimes get by with selling the sizzle, but most of the time what sells is the steak.

FTR, in the long term, selling off of street expectations is a monumentally bad mistake to make. Speculator culture has led to the crash of numerous industries and companies over the years. Speculator culture breeds the same sort of logic that eventually led to something like Michael Milken’s “junk bond” scandal of the 1980s.

On a more pedestrian level, it’s also part of what drove Marvel Comics into bankruptcy back in the 90s too. For those of you old enough to remember bagged covers, countless variants, die cut foil covers, and so on, you know EXACTLY what I mean. Y’all bought 12 copies of “x” book thinking that it’d be worth $10k in 20 years, not knowing that the guy next to you did the same thing. It flooded the market, everybody overvalued, Toy Biz tried to capitalize, & everybody ended up on the losing end. That they were ever able to recover and then get sold to Disney is nothing short of a miracle.

Regardless of how you want to look at it, I’d be VERY careful about going by street expectations and speculation alone though. Historically, there are a lot of ways to lose by using that as the metric for projected and perceived success. As with the Milken thing, you’re also left vulnerable to those would would exploit this as a weakness.


it looks like a market concentration shrinking while expanding :

there are only 3 studio remains : sony universal disney


It is because the game is rigged. The trajectory of the big media companies is to dominate and stamp out all alternative content. It was just as true in 1930 (ironic given that they had to run from Edison patent lawyers in the beginning-the fact that they could shows how much money power they had). Some governments like Italy enacted laws to prevent Hollywood from harming local artists. Even US artists like Walt Disney had to work around the big studios to succeed–he succeeded because he had talent and he knew his audience.
There are probably lots of investors and producers who would like to get into film but they can’t because the big companies control all the gates and they will not tolerate any alternatives. The only reason a Chinese production like the Meg gets US distribution is because it fits the tastes of the media owners. Global. The situation now is much worse than it was in the 1940s when the US government went after Hollywood for anti-competition practices.
We know it is a rigged game because even an animated film like Persepolis got big western marketing–and that has a tiny audience demographic. The claim that the companies only give what people want is just utter BS.
Hopefully Hollywood will implode from its lack of merit and something more grassroots will emerge but I get a Mosfilm vibe from the situation. Disney bought Fox and then dumped all the content into its archives–revival cinemas lost access to Fox content because Disney wanted the screens for their new films. And even worse, the theater owners were afraid to speak on the record about it-fearing Disney reprisals!


Yeah true, but every once in a while a little gem comes along a literal money tree, although created by one person whilst 100% free, would eventually go on supplanting all before it as the ultimate time waster within a space of 12mths alone and in doing so shed further light upon some aspects related too the darker side of gaming.


A big part of the issue is that VFX have been the Superstar of quite a lot of movies for quite a long time at this point, but the perception of Hollywood is and always has been that VFX are part of the “Below The Line” budget and not nearly enough of the budget is being dedicated to VFX artisans.

It’s important to mention the perception to reality mismatch because a Hollywood Distrbutor will pay Chris Hemsworth $20M to be in Thor, as if he is a “Bankable Leading Man”, when in reality if Hemsworth is in a movie with no VFX the movie will lose the studio money EVERY TIME. By definition he’s not bankable and thus has no real world leverage to demand such a salary, but they give it to him anyway to maintain the integrity of the public perception that he’s a “Bankable” star in their movie.

Of course people will claim that VFX budgets are bigger then they’ve ever been and I don’t dispute that, but the ratios are still wrong in most budgets.

Distributors hard nose VFX studios as well as writers on their pricing, which ultimately drives the costs down for the Distributor while simultaneously making it difficult for all but the biggest VFX studios stay profitable when in today’s environment writing and VFX are the most critical components of virtually every successful movie.

In the US outsourcing was a huge problem in the early 2000’s and still is on a smaller scale, but now companies insource by primarily hiring immigrants who’s status in the country is linked to their employment which makes it difficult to impossible for them to leverage a company into paying more money or all the money they deserve when the VFX Studio is in control your ability to stay in the country and work. This is what some VFX studios have done to attempt to reduce their costs and stay competitive and even that doesn’t always work. In a nutshell this is why many studios can’t succeed and I have no idea how to resolve the situation.


The more I think about it the more I return to some old ideas I’ve always thought would be most beneficial to artists.

VFX artists and aligned fields like concept artists, fantasy/sci-fi/horror writers, and talent would avail themselves well to collaborate to create one or more community owned commercial development companies essentially as side development work where concepts/stories are voted up, characters are voted up, members are voted up for certain projects and/or characters and/or environments and/or effects that have been successfully voted up, voting but non-working members would get a small percentage of returns with the largest percentage going to the voting and working members on a per assigned project basis.

Ownership would essentially be non-exclusive but co-independently owned by the initial creator of the story and just the characters they independently created while the collective would maintain control of story and characters as they are built up through the voting process.

Fundamentally we’re always at the mercy of the people that own the IP, sometimes it works out well for us sometimes not. Poor results for us typically happen in the owner of IP that we are working on make poor decisions with a lot of things whether it be release medium, human resources, writers, talent, marketing budget etc.

IP ownership, SUCCESS, full transparency with members, release medium cost to revenue scaling, great management and quality control essentially through lightning fast online voting helps a collective or collectives build long term treasure troves that creatively fulfill and financially benefit members rather than enriching a few at the expense of so many.