The Lasting Impact of Indie Acquisitions by AAA Publishers

AAA publishers face fiercer competition today from indie developers than ever before. With indie games selling in the millions, an abundance of tools that make development easier, and fan gatherings around the world, the indie scene is now a huge part of gaming. Perhaps that’s why publishers have been on a spending spree as of late, acquiring 76 indie studios from around the world since 2016.

After years of neglect, AAA publishers seem to finally be aware of the impact indies have had on gaming. As their awareness grows their desire for control does as well. By making these moves, publishers get that control while indie developers get financial security they previously only dreamed of. But is this a strategy that’ll pay off in the long run?

The large-scale acquisition of smaller studios by the AAA industry does have some benefits. But in the long run, this mass shedding of independence could have catastrophic effects on gaming. You only need to look at the past to see why.

AAA Acquisitions and You

The rate at which large publishers are buying smaller, independent studios is nothing to bat an eye at. Since 2016, AAA publishers have purchased at least 76 independent game studios all over the world. What’s more, the rate at which publishers are buying studios has increased. Seven acquisitions were made in 2016, a number which skyrocketed to 31 in 2018 and 29 the following year. 2020 is only three weeks old, yet there have already been two major takeovers. We could be here all day listing all these acquisitions, so instead, here’s a Google Doc highlighting all that we could find.

Microsoft and THQ Nordic are two of the biggest spenders making all the noise. Microsoft really threw their money around in 2018 after combating a reputation of not having enough games or variety for their console. They purchased Obsidian, inXile, Ninja Theory, Compulsion Games, Undead Labs, and Playground Games that year, and then Double Fine in 2019. THQ Nordic, seeking to rebuild after going bankrupt in 2013, has acquired 14 studios since 2016. Other recent acquisitions of note include Facebook purchasing Beat Saber creator Beat Games, Sony tying the knot with longtime collaborator Insomniac Games, and Google wrangling Journey to the Savage Planet maker Typhoon Studios.

But these are just the tip of the iceberg, with more deals expected in the coming months and years. In early 2019, THQ Nordic announced they raised $225 million to buy more studios. Rumors continue swirling that Sony is looking to counter Microsoft’s spending spree with further purchases of their own. With Google’s Stadia struggling at launch and Facebook looking to improve the Oculus’ line-up, they’re likely just getting started, too.

Why Do AAA Publishers buy Indies?

Buying pre-existing studios is cheaper than building a new one from scratch. You don’t have to hire 100 people and then find a place for them to work. Plus, you get a roster full of experienced developers right out of the gate along with whatever intellectual property they own. When EA bought Respawn Entertainment in 2017, they got Titanfall along with it. Paradox nabbing Harebrained Schemes gained them cult-classics BattleTech and Shadowrun.

AAA publishers are getting smart and buying indie studios they think could produce big hits before they become big. If Minecraft hit Early Access today, Microsoft probably wouldn’t need $2.5 billion to purchase creator Mojang. So, THQ Nordic buys Experiment 101 before they release Biomutant and Sega acquires Two Point Studios just after they release Two Point Hospital.

That’s also why so many of these companies are creating indie searchlight programs. PlayStation is launching an indie initiative with former Double Fine producer Greg Rice. There’s the Square Enix Collective, Take-Two’s Private Division, and EA Originals. These programs get publishers in on the ground floor of young indie creators before they become famous (i.e. too expensive).

Streaming the Future, Today

The role that game streaming plays in all this cannot be overstated. Microsoft are pushing the idea of a gaming ecosystem spread across multiple devices while Sony is potentially bringing their games to the PC. Both have their own streaming services. Look at any movie or TV streaming platform and you’ll see they all share the same mantra: quantity over quality.

With streaming, the customer has unlimited access to every game in that service’s library. They can play a game for an hour, get bored, and play something else all for $9.99 a month. Publishers know that, and they’re priming themselves to be able to put as much content out there as possible.

The Cost of Doing Business

On the surface, these acquisitions make sense for everyone. Publishers get a studio without the hassle of creating a new one from scratch, and developers get the financial security they previously could only dream of. However, while the little guys and gals get a steady paycheck, they lose something vital in the transaction: independence.

Without the creative freedom to produce whatever art they want however they wish to do so, AAA publishers zap developers of what made them special. Publishers are notoriously risk-averse, and it’s easy to imagine a scenario where Microsoft asks Obsidian to make an online survival game or THQ Nordic demands a remake of an old Spongebob game from Purple Lamp Studios. Projects like these are likely in production because the publishers view them as low risk, high reward.

The biggest restriction to any of these studios is that they’ll become console or streaming service exclusive. Microsoft is only allowing games like The Outer Worlds, Psychonauts 2, and Wasteland 3 on the PlayStation 4 due to prior commitments made by those studios before their sale. Once those games are done, nobody without an Xbox console or gaming PC will be able to play one of their games again. The same goes for Typhoon Studios and Beat Games, both now proud anchors of the doomed Stadia and Oculus, respectively.

“They Have Completely Ruined That Company”

The word “Rare” is enough to send any gamer of a certain age into a frenzy. Once a second-party developer for Nintendo (who owned 25% and later 49% of the company), Rare was once a legendary studio. They created Donkey Kong Country, Banjo-Kazooie, Perfect Dark, GoldenEye 007, and so many more classic games. Nintendo granted them rare creative freedom, a blessing for any studio, and one that they took full advantage of.

That all changed in 2002. As the cost of development increased, Rare found Nintendo unwilling to increase its funding and uninterested in purchasing the remaining 51% of the company. With nowhere else to turn, Rare executives sold out to Microsoft for $375 million. It seemed like Microsoft saved Rare at the time, but little did anyone know they were worse off than ever.

After the purchase, Rare made a string of disappointing games such as Grabbed by the Ghoulies, Kameo: Elements of Power, and Perfect Dark Zero. After these failures, they reached a new low with Kinect Sports and Banjo-Kazooie: Nuts & Bolts.

“The Culture Changed”

Former Rare Engineer Phil Tossell attributed the decline to a culture clash between the two companies. “However, as time passed,” he said in an interview with Destructoid, “and there were staff changes at Microsoft Game Studios, together with [Rare Founders] Tim and Chris [Stamper] leaving, the culture changed and it began to feel more Microsoft and less Rare.”

“I think Rare have completely fucked themselves. And it isn’t their fault; it’s Microsoft’s fault,” former Rare composer Grant Kirkhope said in an archived interview with ScrewAttack. “They have completely ruined that company, and it makes me cry every day of my life.”

The hard feelings went both ways, as former Xbox executive Peter Moore told The Guardian in 2008: “Perfect Dark Zero was a launch title and didn’t do as well as Perfect Dark… but we were trying all kinds of classic Rare stuff and unfortunately I think the industry had past Rare by […] But their skill sets were from a different time and a different place and were not applicable in today’s market.”

Whomever you blame, there’s no denying the sale changed Rare forever–and for the worse. Today, their most recent games are Rare Replay, a complication of their old games, and Sea of Thieves, an online multiplayer “live service” game light on content but heavy on the microtransactions.

AAA Crunch Berry

Arguably the worst thing these indie studios inherit is the AAA publishers’ track record with workers’ rights. The games industry has a long, ugly history of treating its developers poorly. Long workdays and weeks, excessive crunch, workplace harassment, lack of health benefits, high turnover, and low job security are all prevalent issues.

There are plenty of terrible examples to point to. Disney shutting down LucasArts after buying the Star Wars license because they wanted nothing to do with video games. Ken Levine gutting his staff at Irrational for the sake of “a flatter structure and a more direct relationship with gamers,” whatever that means. Riot Games employees walking out in 2018 to protest rampant sexual harassment. Rockstar allegedly forcing employees to work 100 hour weeks with no pay. EA laying off 350 people in 2019 despite earning $5.4 billion in revenue that year. Any example works, take your pick.

Executives can (and do) whatever they like, seemingly on a whim. Some of these issues are present on every level of development, of course, but nowhere are they more prevalent than at the top of the food chain.

How Things Change

Keeping people employed and keeping beloved studios alive are great things. However, consider at the long-term effects of such employment conditions; are the aforementioned pitfalls really worth it?

The games these once independent studios make in the future will be different from what they’ve made in the past, and will carry with them different expectations. Lauded as a masterpiece and winning several awards, Hellblade: Senua’s Sacrifice was a small-scale game that outperformed expectations. Now as a AAA project under Microsoft, Hellblade II has a bigger budget and cutting-edge graphics and animation. The sequel can’t be a reasonably well-selling, mid-range game anymore–it has to be a big-budget spectacle. More importantly, it has to sell Xboxes.

Then there’s the case of Firewatch creator Campo Santo. A year after Valve acquired them in 2018, the developer announced that their next game, In the Valley of the Gods, was put on hold. They’re currently working on Half Life: Alyx and Dota Underlords instead. Just like that, a great-looking game from a narrative-driven company was killed–and for the sake of what? A VR game resuscitating a long-dead franchise to sell $500 Valve headsets and a free-to-play online auto-battler that will soon feature, you guessed it, microtransactions.

The Loss of the Indie Spirit

History shows that when an independent studio sells out to a AAA publisher, it’s rare that something good happens. With indie studios having more power, success, and reach than ever, it makes little sense for many of them to sign on the dotted line. Those millions of dollars from hotshot companies can be tempting for anyone, but when you look at how these things typically go, how can you not be anything but disheartened?