Compulsion Games’ South of Midnight and Obsidian Entertainment’s The Outer Worlds 2 had a budget of more than 100 million US Dollars each, according to a new report.
In a LinkedIn post, entertainment lawyer Simon Pulman claimed that recent Xbox first-party titles South of Midnight and The Outer Worlds 2 had a development and marketing budget over 100 million US Dollars each, with estimated sales of around 500,000 copies for the former and 1 million copies for the latter pointing towards the unsustainable business that Microsoft is looking to reset.
In comparison, Pulman highlighted Shift Up’s Stellar Blade, which he said had a budget of 50 million US Dollars and has sold 6 million copies, as well as Warhorse Studios’ Kingdom Come: Deliverance 2, which reportedly cost 40 million US Dollars to develop and market and has sold 5 million copies. Using these examples, he argued that the economics of game development are becoming increasingly difficult to justify when production costs continue to rise while consumer demand fails to keep pace. “If your product costs twice as much to develop and is much less attractive to consumers than the competition, you’re going to go out of business,” he said.
The entertainment lawyer also disregarded the importance of Game Pass player numbers, stating that the number of people trying a game “for 20 minutes” is less important than whether it generates enough engagement and revenue to justify its budget. He placed much of the responsibility on Xbox management, claiming the company failed to adequately oversee development across some of its studios. He described the situation as “a huge failure of management” and suggested that some teams were effectively allowed to operate without sufficient accountability.
Pulman predicts major changes across the game industry going forward. Among his forecasts were further consolidation among major North American publishers, continued layoffs, increased adoption of AI tools, greater reliance on outsourcing, and a stronger emphasis on consumer-focused development. He also expects Asian developers to continue gaining market share due to lower production costs and a stronger focus on products that appeal directly to consumers.
