Most games lose money

Imagine you run a publisher and you have £200m to spend. You could pour it all into one game and pray. Or you could split it into ten bets of £20m each and ship ten games. The second plan sounds safer — and it is, but not for the reason you’d guess. It’s safer because you already expect most of those ten games to lose money. You’re not trying to make ten winners. You’re fishing for one.

That is the strange truth under the whole games business. Most games lose money. A handful of hits pay for everything. The publisher’s real skill isn’t picking winners. It’s surviving the losers long enough to land a hit.

A portfolio bet, not a product

Most businesses make a thing, sell it for more than it cost, and repeat. A bakery that loses money on most loaves goes under. Games don’t work like that.

Games work like film or venture capital — a portfolio bet. You make many bets knowing most will fail, because the rare success pays back far more than it cost. A venture fund backs ten startups expecting nine to die; the tenth, if it’s a giant, returns the whole fund several times over. A studio greenlights ten games on the same logic.

The technical word is hit-driven. The payoffs aren’t spread out evenly. They’re lopsided — a long tail of flops and the occasional monster. You can’t average your way to safety. You need a tail.

The worked example

Let’s run the ten-bet plan and see the shape.

You greenlight 10 games at £20m each. Total spent: £200m.

Now the outcomes — and these are typical, not pessimistic:

• 7 games flop. Each earns back only £8m. That’s 7 × £8m = £56m.
• 2 games break even. Each earns back its £20m. That’s 2 × £20m = £40m.
• 1 game is a hit. It earns £250m on its £20m cost.

Add the earnings: £56m + £40m + £250m = £346m. You spent £200m. Profit: +£146m. A good year.

Now do the experiment that matters. Remove the hit. The other nine games cost £180m and earned £96m (the £56m + £40m). That’s a loss of £84m. Without the one hit, this slate is a disaster.

So one game in ten — the single £250m hit on a £20m budget — turned an £84m loss into a £146m profit. It didn’t just carry itself. It carried the other nine and then some.

That asymmetry is the whole business in one number. Nine games could not save the year. One game made it.

Why budgets balloon

Once you grasp that a hit pays for everything, the spending arms race makes sense.

The size of the rare hit is what keeps the lights on. So you want the biggest hit you can get. And big hits — the ones that earn £250m, not £40m — tend to need big production. Better graphics, more content, more polish, more marketing to be seen at all.

So budgets climb. The £20m game becomes a £100m game becomes a £200m game. Each studio reasons: a small game can’t pay back the slate even if it succeeds, so I must bet big enough that a win actually matters. The fear of a hit that’s too small to count pushes spending up — even though a bigger budget also means a bigger loss when the bet fails.

Why everything is a sequel

The other consequence is risk-aversion dressed as creativity.

If most games lose money, you desperately want to raise your odds on each bet. The cleanest way: bet on something you already know works. A sequel to a game that sold well is a known bet. The audience exists. The systems exist. The risk of a total flop drops.

So publishers chase sequels, remakes, and known franchises. Not because they lack imagination — because a portfolio of safer bets has fewer catastrophic losers. A genuinely new idea is a bet with no track record. It might be the £250m hit. It might also be one of the seven flops. With real money on the line and most bets failing, the new idea is the hardest thing to fund — even though the new idea is the only place a fresh monster hit can come from.

This is the quiet tension. The economics that demand a hit also make the boldest swings the hardest to greenlight.

On the whole

The hit-driven model isn’t unique to games. Books, music, films, drug discovery, venture funding — anywhere a few outsized winners pay for a sea of losers, you’ll see the same behaviour. Budgets inflate toward whatever a win is worth. Safe bets crowd out new ones. The portfolio, not the single product, is the thing being managed.

It’s worth seeing this from both sides. From the outside it looks like greed or cowardice — why another sequel, why so expensive? From the inside it’s a rational answer to a brutal fact: most of what you make will fail, and you have to survive that to win at all. Neither view alone is the whole. The same lopsided maths that funds the games you love is the maths that keeps the riskiest, strangest ideas from being made. We are inside that machine too — every time we buy the safe sequel and skip the strange new thing, we’re a small vote in the system that decides which bets get funded next.