Why Video Games Cost So Much To Make

Let's talk about video game budgets. I think there is a lot of misinformation out there about why games cost so much to make and how we got to this point. Uh, if you look on YouTube, you'll see a lot of big splashy headlines with the the YouTube face attached to them about how Concord cost hundreds of millions of dollars to make. And and now after I put out that Destiny video, uh, Destiny 3, $500 million to make. And so I want to put some of these numbers in perspective because they sound really big, right? Like, oh my god, games are now costing 300, 400, $500 million to make. And they are really big. But where does that come from and and what is it actually going to? I think there's there there I think people need to understand that in order to be able to talk about games in a more let's call it a more informed way. So let's start from the beginning. Games budgets where do they go? Um, I think a

lot of people maybe think of film budgets or other just kind of expenses across the world, different projects that they've worked on where a lot of that budget is going towards expensive equipment or location fees or real estate or other just kind of big big expenses that you need in order to in order to make things. Um, with games it's a little bit different. Games do not really require a lot of expensive equipment. I mean you need computers and hardware but like in the in the grand scheme of things that's not that much money. Um there is real estate costs and and office space is certainly a factor but the biggest expense in game development is people. Um the reason for that is that on a game you need uh you need to pay salaries of people. Um, unlike uh say film productions, just as a point of comparison, you generally can't on a game just cycle people in and out for very short periods as you need them. A lot of people need to be working

on the game from the beginning to the end. Granted, you can have some people come in and and game projects certainly will shift up and down in their staffing depending on what state of the project they're in and and what else they need. But for the most part, you need to have a lot of people working on a game for a long time in order to make that work. So, here is a rule of thumb for how to calculate budgets. It's funny. When when I was uh reporting on my first book, Blood, Sweat, and Pixels, back in 2015, 2016 or so, I got a very helpful number, which is 10,000. That was the estimate at the time for the monthly burn rate of your average employee. Now, that this is this is I I should say I should preface this by saying we're talking about estimates here. We're going to do a little bit of napkin math and try to figure out how we're getting into those hundreds of millions of dollars ranges, but this is all estimates and that's generally what budgets are built upon is estimates. So, let's say the burn rate for people was $10,000 per month per

person back then. That was generally the estimate. So, what does that mean? So, that adds up to $120,000 a year. that is a combination of salary of benefits and overhead and of other various kind of miscellaneous costs including you can kind of fold in maybe some office costs in there some computer costs in there miscellaneous. So that's the bucket, right? Um the number has gone up since there. But let's actually let's do a little bit of napkin math to try to figure out what that means. Look, I got a I got a fancy calculator here. Let's let's reset that. Okay, so we have our 10,000. So 10,000 per month. Now let's say how many people do we want on this project? Let's say we're working on a project. It's 2015. So um fewer people than you need today, but let's say we're working on a project that takes, I don't know, 100 people, right? So we're going to multiply that by 100 people. So that is our number for the uh amount that we're spending per

month. So about a million per month if on our 100 people. And now let's try to figure out so how many months are we actually going to take on this project? Let's say it's a three-year project which again used to be the kind of the standard part for the course. So we're going to multiply that by 36 and then we get our final budget number 36 million. So um just to repeat that's $10,000 per person per month uh multiplied by a 100 people. So that's about a million per month multiplied over the course of 36 months. So that is 36 million. Pretty simple math, right? So that's a project that takes 36 million. Again, we are talking about napkin math here. In reality, these budgets are going to look a lot more complicated. People are going to cycle in and out of the project. You might need to bring in some outsourcing at the end to help out with things. Um, you might need to bring in, I don't know, play testers and kind of other other uh various things. You're going to have to pay fees. There's a lot of other complicated factors, but napkin math, that is is what we can go with. So, cut to today. That number has gone up since

then. And I think at a lot of the most expensive cities, uh, we're talking more 1520$20,000 burn rate per person per month. So, um, let's try to figure out what a game would cost by today's standards in one of these expensive cities, right? So, let's say, let's go on the lower end. Let's go with 15 15,000 per month. Um, lot more people it takes. I mean, look at a place like Bungie. Bungie has I believe around 800 employees. I'm not 100% sure what that number is at now, but some of these games are taking hundreds of people to work on. So, let's say that we're working on a big AAA game. Let's say it's 400 people. That's that's um pretty typical for like full-time staff for a big AAA production these days. So, we're going to go with 400. So, that is our monthly burn rate. That is 6 million. Six. Sorry, man. And the text is really small on my calculator. That is 6 million per month.

We're talking about 6 million per month. So now uh I think 3 years is the low end of the spectrum these days. So let's say that this is more like five years, right? So we're going to go with um 60 months. Ah, and now we are at a much bigger number. Now we are at 360 million. And now you can see how we are getting into the 300 million plus territory just by multiplying some of those numbers by a little bit. $360 million for a video game. So again, that is a burn rate and this is kind of the low end of the burn rate. $15,000 per month for a team of 400 people across 5 years. That is $360 million. And if you look around the the industry like you've seen it's very public some companies um come out with a game and then don't come out with another game for five six years. So these numbers are not just made up here. This is this is real these are real timelines. Um you can also some of them

are public about their staffing numbers. Some of them have um been been very transparent about that. Otherwise you can kind of look on LinkedIn and get a sense for how many people are at a company. Um some of these companies have thousands of people. So we might be going into to numbers way higher than this. Um so this is just again some some napkin math. Um let's just for fun let's go on the higher end of things. So let's say you are in I don't know Seattle or Los Angeles or San Francisco and let's say your burn rate is way higher. Um let's say it's closer to uh let's say let's highend let's say 20,000 a month, right? So that's $240,000 a year per employee. Um, if you're in San Francisco and you're competing with Anthropic and Meta and Google for engineer salaries, um, $240,000 a year might be lowballing it. Like those people might be making more than that. And if you go and you look on job listings for some of these companies, you can actually see some salary bands that are that are upwards and into these numbers. And by the way,

I I think a lot of people out there might hear some of these numbers and think like, "Holy crap, these game developers, they are the 1%." Um, but it's worth putting in context here that in these cities that is a lot closer to a an average salary, like a salary you need in order to live a comfortable life and I don't know, buy a decentsized house and have kids. That is not like if you are making $240,000 a year or even $400,000 a year in a city like San Francisco, you are not rich by any means. You are just you're maybe [snorts] upper middle class. But anyway, okay. So, let's take our $20,000 burn rate. Let's do that by let's say um why don't we let's keep one of these variables the same. Let's say we're we have a 400 person studio. So kind of like a a standard. I believe some of the uh high-end like Sony studios are around there. Um I think they're 400 is is is uh pretty par for the course in AAA these days. Um just off the top of my head. I mean I I don't want to just spit out numbers because some of these staffing numbers are just changing all the time. But there's some big studios

that have around 400 employees. So, let's say 20,000 time 400. So, that is our calculation for our burn rate every single month. Um, again, crazy numbers. $8 million every single month. That is, I mean, just think about that. That's how much we're burning every time whenever we're in pre-production and we have people just kind of tooling away on an idea trying to figure out what's going to work. That is $8 million, right? So, and let's say um let's make this a little shorter. Let's say we we miraculously managed to make a new game, not in the five or six years that it actually takes these days, but let's say it only took us four years. So, times 48. And again, we are upwards of $300 million. We are in the three $384 million uh ballpark math for that game. So, you can see how these numbers have gotten pretty wild. Um, and so when you're out there and you're seeing these headlines that are like, "Oh my god, Concord costs $250 million or whatever and and somehow that they couldn't make

a giant open world or whatever." Just think about it in terms of number of people times number of months they were all working, which is going to be an equation that you take to no matter how what kind of game you're making. It doesn't matter if you're making a multiplayer shooter or a big open world. Um, the open world games might take more time and more people because you're creating more content, but all of these games once you hit a certain threshold of the number of people that you need, um, you are you are getting into pretty expensive territory. Again, there's all sorts of factors here. I mean, some of these companies you could certainly like look at and say, hey, a little bit of wasteful spending here. Hey, maybe you shouldn't you don't need two years of just kind of pre-production dreamland to get this game off the ground. Maybe actually you can you can iterate a little quicker and there's a lot of conversations being had around the industry as we speak about how to get the length of time down. But the one thing that is not going to go down at least here in the US anytime soon is the

burn rate itself. That that kind of per person per month rate that we've played around with that went from 10,000 to closer to 15 to 20,000 per month uh nowadays. Um and the reason for that is just that the cost of living in the US has just skyrocketed enormously. And in order to keep up with um inflation and with com competing companies and in order to give people a standard of living that they deserve, you need to be spending that kind of money. Um this is the main reason that we are seeing a lot of game companies look elsewhere outside of the United States for development. Um some of them are staying here for sure. or some of them are staying here and then doing co-development or outsourcing elsewhere. Outsourcing has been a thing in the games industry for a very long time, but it's uh really picked up in recent years to the point where again it's been called co-development because it's a lot of just kind of we are we might have a small team of of 100 people here and we are working with teams all over the world to do these peace meal

things for our games. And therefore that is going to cost us less because we don't need to hire those people full-time and just have them in our studio every single day just watching that burn rate go up. Um instead we can bring them on in and out as we need them. And that I think is is something that we're going to see more and more of as time goes on. But at the end of the day that is uh fundamentally why these numbers are going up. It's a combination of salaries going up and the amount of time it takes to make games going up. Um, you should check out I'm going to throw a link in the the description of this YouTube video to my Bloomberg article. Um, some of the Bloomberg articles I've done about why costs are going up and the mismanagement that is involved there and the waste and also just the realities that everybody is trying to deal with. Um, some of these problems and I think that um maybe uh if you watch a lot of YouTube videos, maybe you've seen a lot of people just trying to blame people and saying, "Oh my god, these developers are so lazy. Oh my god, these managers are so greedy. And

sometimes there's some truth to that. Uh and and uh if you've followed my reporting over the years, I'm sure you've seen stories about both of those things being true at times. But the biggest factor is just the economic reality that everybody is trying to navigate in 2026. um the extreme competition, the swelling of budgets, the exponential growing of timelines, um the fact that it takes more and more people to make games, more and more time to make games. That is what is causing these budgets to get out of control. Um before before we say goodbye, let's do one more. Let's let's play around real quick with one more thing. I want to I want to try the highest end of the highest end. So, let's say we have a team and uh we're high-end, right? So, we're let's say we're all in San Francisco and let's say we have a huge team. Let's say we have a team of a thousand people on in our game studio in San Francisco. So, so our burn rate is $20 million a month, right? So, that alone, I mean, think about that.

That means that in a year [laughter] you're spending $240 million. But let's say that we are spending let's say we're we're really going out all out. We're making a an openw world AAA RPG with tons of immers immersive systems and options and all sorts of cool stuff that you can do in this game. This is our our fantasy game times. Let's say it takes five years, 60 months. Let's say it takes 60 months to make. So now we are getting into the more than a billion territory $1.2 billion for this game. So yeah, I mean you can see how these these numbers are getting out of control. Um, so whenever you see a game, I want to do do a little bit of a thought experiment here. And this is not I I I think that like um there's there's certainly uh profit to be made from getting people angry and and making rage videos. That's not what you'll find here. For me, you will you will always find a level-headed hopefully a little bit of informative approach to this stuff. But just think about this. the next time you see a game

announced um especially from a western company um uh think about the last time that you saw a game from that studio like theoretically let's say that Sony Santa Monica announces their next game um at the state of play next week. I I don't know if that's going to happen but let's let's let's say it does hypothetically. Um their last game is God of War Ragnarok in 2022. So let's say they announce it next week and then it comes out in 2027. So that'll be a 5year gap between those two games. So think [snorts] about these numbers. Maybe try to figure out how many people worked on that game. Maybe they're in Los Angeles, so pretty high on the burn rate scale. 15,000 you could play around with. And just think about that. Like think about how much money goes into these things. And then you will have a better understanding of why things are the way they are, why game companies are trying to charge more for their games, which has not worked, not been an effective tactic. um why game companies are are shutting studios down and laying people off and trying to cut costs in as many ways possible. Um this is this is

where we're at and that burn rate that that original number the 10,000 15,000 20,000 that you can get a lot lower if you were going to cheaper countries to countries that don't require the same kinds of salaries and benefits um that you see here. Uh, another big part of this equation for a very long time, uh, and still to this day was always tax credits. Because if you can shave off, if you are in Montreal and the Montreal government is giving you a 30% tax credit on the people that you hire, then you are seeing a massive discount on that budget. You are seeing a a significant amount of that money coming back to you in the form of tax credits. And so it is much cheaper overall. Um, so yeah, I mean, think about that. Just next time you see one of these big numbers, just think about what that actually means. Because generally it means that you have a fair number of people being paid salaries to work on a game for a long period of time. And you know what? Hopefully they are all getting good salaries and able to feed their families and live a decent life as a result of these budgets because at the

end of the day, the the money that we're talking about is coming from corporations and giant companies and investors who have the money to spend. So, I don't know. It's it'll be interesting to see how people handle this moving forward. And uh just think about all this next time you see one of those those massive numbers.