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but if they KNOW they have a horrible idea, why not just scrap it?


Because they put a lot of work in it nontheless so why not try to get at least a bit of development costs back.

This is of course different when you are a really famous developer who is known for high-quality games like Blizzard. They kill games that are crap.

How was the name of the Starcraft FPS again where they pulled the plug?

And a last thought I think there are quite a few crappy games that are scrapped but these are mostly killed before the public sees something about them. When they are in Alpha stage and can be shown it is normally to late.