Why Game Studios Fail in 2025: A Deep Look Behind the Industry Crisis

Could you please introduce yourself? 

My name is Greg Street. I've been a game designer for about 28 years. I started on the Age of Empires series, then worked on World of Warcraft – players may know me from that time as Ghostcrawler. After that, I joined Riot Games and worked on several projects. Most recently, I led my own studio, Fantastic Pixel Castle, which unfortunately lost its funding. At the moment, I'm between jobs. The studio was funded by NetEase, and we were making an MMO in an original IP. We shared a lot of development openly, showing the game early to get player feedback and detect potential issues.

Showing work early is still unusual for many studios. Some companies hide projects until a big announcement, and then if players don't respond well, it's too late. Are you someone who believes in showing early work, even while it's still in progress?

I think it was the right approach for our project. It was a new IP from a new studio, so we wanted to make sure there was an audience for it. Traditional publishers often still think in terms of a big E3-style reveal, but that carries risks. If you learn too late that players aren't connecting with your game, you may not have time to fix the problems before launch.

You've worked at Riot, Blizzard, and Ensemble Studios – legendary places in the industry.

Ensemble was my Age of Empires period. I worked with Bruce Shelley all the time.

I once wrote a long article about Ensemble's history, and shortly after we published it, the studio closed.

That was part of why I moved to Blizzard. It felt like Microsoft wanted us to keep making sequels, and Ensemble had become expensive because people had been there for so long. They eventually shut it down, though I had already left by then.

How did the idea of opening your own studio come about?

Blizzard and Riot are wonderful places, but they're slow, especially with R&D on new projects. Large teams make it hard to move quickly. I wanted to form a small team – even for an MMO –and outsource as much as possible. NetEase offered to fund us, and since I had no fundraising experience, it made sense. I didn't want to go through the VC route at the time because that seemed scary.

Speaking of VCs, how do these companies evaluate game studios?

I think VCs are discovering their model may not be compatible with games. A few years ago, many Riot colleagues got VC funding for their own games, but a lot of those studios didn't succeed. VCs want quick returns, but games take a long time to develop. Many major funds now avoid games entirely. Those still interested often offer small amounts that aren't enough for the scale of the project we were building.

You've mentioned working with small, highly experienced teams. How large was your team, and how did you structure it?

I arbitrarily picked 100 as a target cap, though we were at about 40 when we shut down. On League of Legends, the team was over 500 people. The rumors are World of Warcraft today is over a thousand. I wanted something more personal – where everyone knows each other and stays involved in decisions. We were remote but met in person a couple of times a year, which is manageable with a small team.

We hired only senior-level people: principals, directors, highly experienced leads. Their job was to establish pipelines and styles, and then we outsourced the bulk of production.

How do conversations with investors typically go?

Usually, it starts with an introduction or a cold call. Investors want a short pitch deck. They care about the team's résumé, passion, and one strong gameplay hook. They're less interested in worldbuilding, art style, or technical innovation unless it directly supports that hook. After the pitch, they often want to play the game. Our game was already playable on Steam, so playtests were easy to arrange. Most conversations fell apart not because of the game, but because higher-level executives weren't approving deals. We consistently heard "We love the game, but we're not writing checks right now."

A lot of studios today struggle with launching games that actually gain traction. Even strong teams with impressive talent sometimes miss the mark. Why does that happen?

Games are a hit-driven business, much like film or TV. No one intends to make a bad game. Some become huge successes, and some fall short. 2025 has many great games, but there’s an investment problem. COVID created unrealistic expectations, many companies overhired, interest rates hurt borrowing, and development costs in the U.S. and Western Europe became extremely high compared to regions like Eastern Europe or Asia. Once layoffs began, fear spread, and no one wanted to be the first to take a big risk again.

Do you think this situation will shift the industry toward smaller, mid-tier games?

Greg Street: I think budgets and team sizes will change, but not necessarily because smaller automatically means better. Expedition 33, for example, deserves its praise because it's a good game – not because it was made cheaply. Many small projects fail, too. The key is still the strength of the game itself.

Publishers look at small-team successes and hope they can replicate them cheaply, but good games come from talent, ideas, and execution. Big, expensive games can still succeed. Small games can also succeed – but many don't.

Does this return us to a 'shareware-like' model where gameplay itself sells the game?

In many ways, yes. Players decide quickly whether something feels good. Playtesting is critical. Showing the game early helps developers understand whether they should continue investing or pivot.

Several startups are exploring the idea of releasing abandoned or unfunded games as open-source assets, similar to what Epic did with Paragon. Do you think that model could work?

It depends. Our game was a client–server MMO, so without servers, you can't really play it. There's still a chance an investor could pick it up years later, so we shelved everything carefully. I think publishers who've cut back will eventually panic around 2027 when they realize their portfolios are empty. They may go on a shopping spree – and any indie studio that survives will be in a strong position.

Looking ahead, what do you think will happen between 2026 and 2030?

Steam is already flooded with low-quality games, and that won't change soon. But I think the industry will recover. There's hesitancy, but not collapse. Big franchises will continue to anchor the market – Call of Duty, Battlefield, League of Legends, World of Warcraft. There will still be platform sellers, still major releases.

I don't think the era of 500-person teams all sitting in one building in LA or Seattle is the future. Development will likely be more distributed, with smaller internal teams and extensive outsourcing, closer to how Hollywood operates. Tools like Unreal already make game development more accessible. As tools get better, small teams will be able to create more without fighting technical limitations.

Greg Street, Game Designer

Interview conducted by Kirill Tokarev