This is not exactly what you asked, but isn't Epic one of the few companies to outsource a certain part of graphical work to China? I remember that was one of the reasons why Gears of War only cost $10 million to develop.

Outsourcing seems to be slower in the games industry, and outright moving of studios is even harder. But I think we'll get there at some point, especially since in the next gen all the platforms are likely to be as expensive to develop for as the PS3/360 are now, if not more.

Silicon Valley is the reason.

That's the same reason that Austin, TX (also home to some of IBM, etc's major engineering workforce), and Seattle, WA (Microsoft, and now a legion of other companies) are also hotspots for game development.

People don't like to move -- particularly experienced (i.e. valuable) engineers and artists who have set down roots (i.e. family). You *could* start a dev studio anywhere, but convincing experienced devs to move to that location, for your startup, would be... tricky, at best. You'd probably have to offer them more money than they are paid in the high cost-of-living area they are already living in.

Also, take into consideration that senior engineers, artists, etc. are also looking ahead to stuff like retirement, even if its 20+ years down the road. Living in a high cost-of-living area has natural advantages when it comes to 401K investments, etc. You make money in the big city when you're young, and then move to the low cost-of-living area to spend all the money you saved, when you're old. 10% of 100K per year is 67% more retirement savings than 10% of 60K per year.

There are a few acclaimed studios in lower cost-of-living areas in the US, but they're pretty rare (Raven, in Madison, WI, is a good example -- but they *do* of the University of Wisconsin to draw from, at least, and their engineering school is very very good).

Actually, you can't really compare food to the entertainment business. There's many things that need to be taken into account when growing food, like certain things growing better in certain climates, and the extra costs involved in shipping the food(hence why out of season stuff is generally much more expensive). Not to mention there's always certain industries you want to keep parts of domestic in case of times of war or huge disagreements between countries.

And as someone else said, there is a lot of synergy between the video game industry and film/TV. Which is why I really wouldn't be surprised to see more studios move to the Vancouver area in the future.

How can that be??

I fought the US had a unified economy.

I think the EU economies are probably more similar than the US states.

@slimebeast, cost of living varies a lot depending on the state and city. It even varies a lot between cities in the same state. A gallon of gasoline may cost 2.50 in Texas but it cost around 4.00 in Cali. Cali is one of the most taxed states so the cost of living is very high there.

It is a unified economy, but people get paid different rates living in different areas.

For example, In Syracuse NY area, a 2000 sq ft house will run you 170k-220k (just an average) yet the same house in certain areas of New Jersey can easily run for 700k-1m. Since owning a house and other goods are a lot more expensive in NJ than Sryracuse NY, the companies must pay their employees more to be willing to live in the area. If it wasn't for the high taxes in NY, moving to Syracuse would be a great idea for a lot businesses since they can pay their employees so much less. Buying land in this area is a lot cheaper too.

There's infrastructure in So Cal to support games studios. Like, actors, musicians, writers, mocap studios, and sound studios because these have been here to support the movie studios.

It varies state by state and varies even more city by city.

For example, the cost of living in California is *vastly* different.  So much so that you can live decently in Texas for $30k/year while you be in near poverty and have to scrimp and save on $30k/year in most California places.

Going even further, I live in the Dallas metroplex in Texas which is usually called DFW (Dallas/Fort Worth) or just Dallas when it's actually like 12 cities.  If you live in Plano (a DFW city) it can get fairly expensive by Texas standards to live there while where I live now, Lewisville, another DFW city, it's incredibly cheap.

Yes, but price difference in cost of living is like that all over the world, here in Sweden too. A house in rural areas cost almost nothing and while in big cities all housing is very expensive. Still, in Western Europe salaries aren't adapted to differences in cost of living. In Sweden you get paid the same in pricey Stockholm as in cheap villages.