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WoodenPints said:

What I find most bizarre is how over the last couple of years all western publishers have doubled down on AAA titles despite underperformance from them consistently then we had Square Enix say the same despite all their recent AAA games massively underperforming and we had Sony do it as well despite thin margins and super high budgets and risk of them and now Microsoft going down the same road whilst all the good stuff is coming from A/AA teams these days.

I believe people are missing the point.  There will continue to be A/AA games and publishers will still invest in them.  What they will not do is invest in them with huge budgets.  Only established IPs are getting sells for those 70 dollar price tags at a decent clip to justify the investment.  Think about Hellblade 2.  The game is coming out at AA price point because one its a short single player game that no matter how great the game looks cannot justify 70 bones for the amount of content within the game.  This is MS fully understanding the console gaming crowd and the expectations of a AAA game in this industry.

There have been a lot of devs forming their own studios looking for big money for their new IPs but those games really have not been hitting the market and gaining the sell to justify the investment.  This is why most of these publishers are only going to spend that money on established IPs.  What you are not going to see is a lot of new IP with AAA budgets because the landscape isn't supporting that kind of risk.  I actually believe you will see MS own studios drive their established IP with bigger budgets but for smaller A/AA games, Gamepass is where MS pour the investment into which so far is what they are doing.