AAA video game studios are caught in a pincer movement. On one side: nimble indies delivering hit games on shoestring budgets. On the other: huge “games-as-a-platform” such as Roblox and Fortnite pulling players, creators, and brands into their gravitational orbit. In between, AAA studios are getting squeezed. Executives of these incumbent studios can no longer ignore a hard truth: They’ll have to reinvent how they operate if they want to stay relevant and secure their future.  

Indie developers are thriving despite lacking the large workforces and financial resources that would come with being owned by a major publisher. As an illustration, their PC revenues grew at a 22% compound annual rate from 2018 through 2024, vs. 8% for AA (mid-market studios) and AAA (large studios with big teams and budgets that focus on making ambitious titles), even as indies' share of total games available on Steam has remained relatively constant, according to our analysis of estimated upfront game sales data from Video Game Insights (see Figure 1).

Over the past few years, titles such as Palworld and Manor Lords have proven that ambitious indies can deliver blockbuster hits without blockbuster budgets. That has continued this year. Though estimates can vary, indie games Clair Obscur: Expedition 33, Kingdom Come: Deliverance II, and Split Fiction each reportedly sold more than 1 million copies within just three days of release. In contrast, Electronic Arts’ (EA) highly anticipated 2024 release Dragon Age: The Veilguard “engaged” 1.5 million players, nearly half the amount that the company had projected. Its underperformance contributed to EA revising its financial projections downward and restructuring the studio that developed the game.

At the other end of the spectrum, popular games-as-a-platform Roblox, Minecraft, and Fortnite are capturing double-digit user growth annually (see Figure 2). These games are becoming the center of gravity for the entire ecosystem, from players and developers to brands and advertisers. This is likely to continue with the release of Grand Theft Auto VI in 2026, a game that’s expected to command massive play time for years after launch.

The result? AAA studios, which were already facing intensifying competition within their segment of the market, are now under pressure from all directions. Their game budgets keep increasing, margins are tightening, and the fight for player attention has never been fiercer.

The implications are stark. The top 10 titles on each platform capture approximately 50% to 60% of total revenue for active games, according to Bain analysis. And breakout hits are proving hard to replicate—around 20% of studios with a hit successfully launch a second, our analysis found.

Layer in the postpandemic normalization of demand, and it’s no surprise that some large publishers have cut staff or shuttered studios.

What’s fueling the disruption

It’s not just a cycle. It’s a structural shift reshaping the economics of the industry. Several trends are behind it.

• Player preferences are evolving. While gamers continue to value high-fidelity graphics, gameplay is the most important reason players choose and stay engaged with games. In Bain’s 2025 survey, 22% of gamers cited gameplay as the No. 1 reason they play their favorite games (the response with the highest share), while high-quality graphics or audio was cited by only 7% of gamers as the most important factor. That dynamic has helped level the playing field, as game studios of any size can achieve commercial success if they get the gameplay right—see Undertale, Stardew Valley, and Vampire Survivors, for example.
• Indie quality is up. Top indie games rival, or surpass, AAA titles in critical acclaim. Last year, 75% of the top 20 highest-rated games on Metacritic were developed by indie studios, nearly double their share in 2016. As of this writing, Clair Obscur: Expedition 33, Blue Prince, and Split Fiction topped Metacritic’s 2025 rankings, outshining even the most ambitious AAA releases.
• Barriers to market entry are collapsing. New technologies and platforms are democratizing game development and distribution. No-code game engines and other off-the-shelf tools are getting better and cheaper, enabling solo developers and small studios to develop games with graphics and other elements that are on par with AAA studio titles. Steam and other online game marketplaces have removed the logistical bottlenecks to launching games that once favored established publishers​. Now, an AAA studio title such as Assassin’s Creed Shadows competes head to head for attention with indie game Chicken Shoot on Steam. It’s the equivalent of a major film studio releasing the next blockbuster on YouTube, jockeying for eyeballs alongside user-generated cat videos. Agentic AI, while potentially reducing large studios’ development costs, will also remove barriers to entry for smaller competitors.
• Traditional big-budget economics are breaking down. Larger studios’ long-standing approach to creating and selling games faces big challenges. Development costs have ballooned (especially in high-cost labor markets), and development timelines have grown, lengthening the wait for a return on investment. Digital distribution hasn’t brought the margin relief studios hoped for, as platform fees now eat into what used to go toward logistics and retail expenses. At the same time, the shift to online games that receive continuous updates and offer live services means operating costs of games are now a significant line item in the budget.

The bottom line for large studios: The math simply doesn’t work as easily as it once did, especially as more games are released every year (see Figure 3). 

Three moves to break the squeeze

If incumbent game developers want to survive in this new paradigm, they’ll need to fundamentally rewire how they operate. The large studio model worked well for decades, but the industry landscape has evolved dramatically, and now large studios must do the same. Emerging leaders are embracing three key imperatives.

1. Deeply understand your core customer and build everything around them. Gamers are discerning, and preferences vary widely across segments. Winning studios don’t try to please everyone or chase every trend. They zero in on a clearly defined core audience and go all in. That means making deliberate choices about which players you serve and which you don’t. The most successful studios focus every part of the business—from development to marketing—on delighting their core players.

This isn’t about narrowing ambition. When studios build for their core, they can unlock deeper engagement, stronger communities, and more resilient revenue streams. Loyal fans don’t just buy your game—they evangelize it. They provide early feedback, boost discoverability in channels like Discord and Reddit, and stick around to buy what comes next.

Matching your customer focus with your studio’s unique strengths is key. Riot Games, for instance, designs for competitive multiplayer fans, less so for casual players, and aims to deliver these fans top-notch service across game genres. Meanwhile, Paradox Interactive thrives by catering to fans of the strategy genre 4X. Their fans know exactly what to expect and keep coming back for more.

Game design follows the same principle. Standout studios make intentional choices about what they want to be known for and perfect it. For example, Supergiant Games put gameplay front and center in Hades, Hades II, and Bastion.

2. Champion cost discipline and efficiency. With the guiding strategy in place, cost discipline becomes crucial. The most successful studios won’t be afraid to start with a blank sheet of paper and redesign their processes from the ground up, placing strong emphasis on efficiency and reining in costs.

Leading studios already manage their development and marketing expenses by strategically building a globally distributed team. These days, plenty of quality talent can be found in lower-cost locations. About two-thirds of the workforce at US developer EA and nearly half of the staff at US-based Take-Two Interactive Software are located outside of North America, for instance.

Leading companies are also leveraging best-in-class technology and tools, standardizing their use of those solutions across games. They’re keeping game design appropriately scoped via tight feedback loops and limited open-world sprawl. And they’re giving players early access to a game to accelerate feedback and reduce the risks that accompany spending years on siloed internal development.

3. Manage the portfolio to maximize your intellectual property value. Leading studios extend the reach of their successful intellectual property across platforms, genres, and formats, generating continuous engagement rather than one-and-done hits. This reduces risk (the audience is already established), creates new revenue streams (e.g., LiveOps, transmedia), expands franchise value beyond the original game, encourages more engagement with the franchise, and, importantly, meets gamers where they are. On average, around 22% of gamers’ time spent consuming other media is focused on engaging with game-related IP, according to Bain’s 2025 gamer survey.

That said, leading studios rigorously avoid franchise fatigue by grounding greenlight decisions in as much data as possible.

Capcom has been careful to strike a balance between expansion and restraint. Rather than flooding the market with new titles, the company has paced releases within its franchises to carefully manage player appetite while investing to keep IP relevant. For example, Capcom partnered with Tencent’s TiMi Studio Group to develop the pending Monster Hunter Outlanders, a mobile extension of its successful Monster Hunter PC and console series. The company has also expanded reach through cross-promotional game deals with other studios, such as a long-running series of fighting games that pit Capcom’s Street Fighter characters against Marvel superheroes. The crossover titles started as coin-operated arcade games in the 1990s and now span consoles, PCs, and mobile. Each move reflects a clear strategy: extend IP thoughtfully, meet players where they are, and keep iconic franchises fresh across formats and generations.

Relevance must be earned

The era of AAA dominance is over. The winners of tomorrow will operate leaner, think smarter, and execute with laser focus. Reinvention isn’t optional—it’s the only path to sustainable relevance in an industry being rewritten from both ends.