The games business in retreat: Bungie cuts, Steam goes to court, and a law that won't let you 'kill' a game

It was a brutal week to make games, and a revealing one to study how the money works.

A studio shut down a game six months after launch. Bungie is winding down Destiny 2 and cutting staff. Epic’s developers are still processing 1,000 jobs lost in March. Meanwhile the storefront that takes a cut of nearly every PC game sale is in court, and California lawmakers voted to stop publishers from switching off games people paid for. Most of these stories are the same story, told from different seats: the business models that funded the last decade of big-budget games are buckling, and the people who make games are paying first.

The contraction has one cause: the live-service bet didn’t pay off

A “live-service” game keeps selling things to the same players for years — battle passes, skins, season upgrades — instead of one purchase up front. The promise: a single hit funds a studio forever, like Fortnite does for Epic. The reality this week: most of these bets lost.

Bungie, the studio Sony bought for $3.6 billion in 2022, is ending development on Destiny 2 and reportedly laying off many of the people who built it [2]. Sony booked a $765 million writedown on the Bungie deal as its operating income fell [10] — accounting language for “we paid far more than this is now worth.” Bungie’s new game, the extraction shooter Marathon, is the company’s last big hope; its relaunch this week was knocked offline by server failures for hours, on the exact day Sony’s showcase was pointing new players at it [4][14].

The pattern repeats across the industry. Epic laid off 1,000 people in March; developers told PC Gamer they had only “a slight hint that the company revenue wasn’t doing well” before the cuts landed [15]. The honest detail there is how blind staff were — the people building the games rarely see the spreadsheet that decides their jobs.

Mark Darrah, who ran Dragon Age at BioWare for nearly two decades, named the trap plainly. Big games now cost hundreds of millions to make, so studios bolt on live-service hooks to earn that back over years [5]. But “everything can’t be a live-service,” he said — and when too many studios chase the same few-hits-sustain-forever model, the ones that miss simply close [5][16]. EA’s Dragon Age: The Veilguard started life as a live-service game, was rebooted into a single-player one, and still underdelivered [5]. The model is now so dominant that Darrah floated movie-style product placement as an escape — a sign of how few options studios think they have.

Platforms are quietly admitting the boxes cost too much

The console makers spent the week trying to prove their hardware is still worth buying — a tell in itself.

Sony’s PlayStation 5 launched at $499. It now runs from $649 to $899 for the top model [12]. That climb has a cost: PS5 sales dropped nearly 50% year over year [12]. Sony is also selling fewer of its own exclusive games. New data collated from Sony’s filings shows first-party sales fell from a 58.4 million-copy peak in the 2020 financial year to 28.9 million in 2024, before a modest rebound to 32.1 million last year on the back of Ghost of Yōtei [10][21]. Sony has closed first-party studios — Dark Outlaw Games and Bluepoint among them — and shifted back toward console exclusives after dabbling in PC releases [10][12]. Fewer studios, longer development cycles, fewer games to justify the price.

Microsoft took the opposite tack on price. After subscriber growth slowed last year, Xbox cut Game Pass prices in April. New CEO Asha Sharma told staff that since the cut, “we have seen acquisitions grow and retention improve” [18]. Game Pass lets players rent a library of games for a monthly fee instead of buying each one — and the lesson, as PC Gamer put it dryly, is that when you make things cheaper, more people buy them [11]. The harder problem is that a subscription pays studios a slice of a flat fee, not a full sale; Darrah warned it can push developers toward “degenerative design” built to juice engagement numbers rather than make good games [5].

The week’s smaller platform story was the loudest online: Xbox said it would stop showing rival PlayStation and Switch logos in its showcases after fans complained [6][17]. Sharma called the original choice “a miss” [17]. It’s a cosmetic fight that reveals a real one — Xbox is unsure whether its future is selling its own boxes or selling its games everywhere, and it keeps lurching between the two.

The fight over who controls the storefront

Two stories this week are about the same lever: whoever owns the store sets the terms for everyone selling on it.

Valve, which runs Steam, the dominant PC game store, is facing antitrust lawsuits in the US and UK [7]. Steam takes roughly 30% of most sales in a market Bloomberg pegs at $40 billion [7]. The developers suing argue Steam quietly punishes studios that offer cheaper prices on rival stores — using its grip on where players already buy to stop competitors from undercutting it [7][21]. In a 2023 deposition, Valve co-founder Gabe Newell denied any such rule exists, even when shown internal messages that appeared to enforce it [7]. This week he argued players have “enormous choice” about where to buy [20]. The case continues; nothing is proven. But the mechanism is the point — a 30% cut, charged on nearly every PC sale, is the kind of toll only a near-monopoly can hold.

The other lever is legal. California’s State Assembly passed the Protect Our Games Act, AB 1921, by a bipartisan 43-16 vote [1][9]. It would force publishers to warn players before shutting down server-dependent games and to leave a way to keep paid games playable — an offline mode, community servers, something [1]. It covers only purchased games released after January 2027, not free-to-play titles [1]. The campaign behind it, Stop Killing Games, started after Ubisoft switched off the racing game The Crew and removed it from players’ libraries [9]. The trade body representing Ubisoft, Take-Two, Microsoft and others says the rules would make games “prohibitively expensive to create” [9]. For a player, this is the heart of it: you may not own what you bought. The bill now heads to the State Senate.

Two studios, two outcomes — and a quieter cost

The week’s bookends show the gap between making it and not.

Brendan Greene — the “PlayerUnknown” of PlayerUnknown’s Battlegrounds — shut his survival game six months after launch and laid off staff. “I have reached the limits of how far I can continue to fund this journey,” he wrote [3]. He left Krafton in 2021 to build independently; self-funding ran out. At the other end, Yacht Club Games sold 300,000 copies of Mina the Hollower in three days [19]. Founder Cris Velasco had called the game “make-or-break” for the studio; they made it, “for now, anyway” [19]. One smaller studio survives on a sharp launch; another, run by a genre’s inventor, can’t carry the burn rate. The difference isn’t talent. It’s whether the money arrives before it runs out.

Underneath all of it sits a labour question the industry keeps trying to answer with cheaper inputs. Crystal Dynamics’ Tomb Raider remake carries a Steam disclosure that generative AI was used “during development” for “early exploration,” with assets “replaced or refined by humans” [22]. Its parent, Embracer Group, has called AI a tool for “driving efficiency” — the same Embracer that went into fire-sale mode and cut studios after a $2 billion Saudi-backed deal collapsed [22]. “Efficiency” in a year of mass layoffs is not a neutral word. When a studio talks about doing more with AI, the people who were doing it before are usually the ones who just left.