Game development at a crossroads: Ukrainian studios navigate global challenges and the realities of war

The video game development industry is going through difficult times, and this is reflected both in players and in creators of gaming content. This applies not only to global giants, but also to Ukrainian studios that are forced to adapt to new realities. Analysis of recent trends and expert opinion helps explain the depth of the crisis and the ways to overcome it.

Economic pressure on players and producers: from old “hardware” to rising prices

A fresh survey from Steam, the largest online computer game store, shows that most gamers continue to use outdated hardware that is more than five years old. This means that a significant share of popular graphics cards near the top of the rankings are no longer in production, and their market share is growing extremely slowly. Meanwhile, manufacturers of game consoles faced record-low sales this summer. The reason was a sharp rise in prices: the cost of games increased by 25%, and console prices rose by 14% to 33%, depending on the model and country. At the same time, consumers and distributors complain about a potential shortage of popular systems such as PlayStation 5 and Xbox due to a chip shortage. The situation is further complicated by rising demand ahead of the fall releases of the most anticipated games.

These changes are unusual. Historically, as a new console generation approached, which happens roughly every 7-8 years, prices for previous models would fall. However, the opposite trend is now being observed. Against this backdrop of global developments, many well-known companies, including Microsoft (Xbox Gaming), Ubisoft, Sony (Bungie), Epic Games, Refactor Games (Delphi Interactive), Playtika, Meta (VR divisions), and Playrix (including its Ukrainian division VOKI Games), have announced staff cuts. This contradictory picture points to major turbulence in the industry.

Hardware problems: AI and memory shortages are pushing prices up

Serhii Korshunov, an expert in game development and editor-in-chief of GameDev DOU, explains that rising component prices are nothing new. Even before the war, the cryptocurrency mining boom caused a significant increase in graphics card prices. Now, growing demand for artificial intelligence (AI) and RAM from data centers is redirecting production capacity, which in turn affects the cost of components for gaming PCs.

As for the console shortage, the expert notes that there is currently no severe shortage. However, manufacturers have significantly increased prices for their products. This contradicts previous practice, when prices usually dropped ahead of new generation launches. Still, the price increase does not affect overall demand too much. It is worth recalling 2021, when the pandemic caused a semiconductor shortage. Back then, Microsoft and Sony barely kept up with the insane demand, while speculators known as “scalpers” bought up consoles and resold them at twice the price. Today, companies warn about price increases in advance, allowing those who planned to buy to do so at the old price. This creates additional difficulties for companies bringing new products to market, such as Valve’s Steam Machine, which already has a higher starting price than expected.

Impact on AAA games and developer strategies

Demanding AAA projects are usually developed with the goal of running smoothly on current-generation consoles, which have 2020 hardware. This means that a sharp drop in demand for such games is unlikely. Players will probably buy them less at full price and wait for discounts more often.

Ukrainian developers, like their Western counterparts, cannot directly influence these global hardware-market challenges. They have to adapt. Moving to more modern and demanding development technologies does not happen instantly. Studios choose a technology stack they already know. For example, a team working in Unity is unlikely to suddenly switch to the latest version of Unreal Engine, because that would require retraining the entire staff. To reach the broadest possible audience, developers focus on the mid-range segment of gaming hardware rather than the premium one.

AI as a tool for optimization and the consequences of the pandemic boom

Using artificial intelligence to reduce development costs has already become a reality. Some studios use AI to write code, while others use it to create tools that speed up art production. For example, Ukrainian studio AB Games developed a plugin that allows artists to speed up their work by 30-50%. However, this also has a downside: automation can lead to staff reductions.

A more serious crisis in game development is linked to the “bubble” that burst after the pandemic. During lockdowns, studios actively expanded their teams to meet the increased demand for games, as people spent more time at home. After the pandemic ended, the number of active players fell, but the large teams remained. This led to the current wave of layoffs both in the West and in Ukraine. Added to these global problems are the consequences of the war: it has become harder for Ukrainian outsourcing companies to find clients.

Ukrainian game development: resilience and adaptability during war

Despite difficult global and local challenges, Ukraine’s video game development industry remains strong. For the average consumer, Ukrainian games may be associated with cult projects such as “Cossacks,” “S.T.A.L.K.E.R.,” and “Metro.” However, there are many more studios operating in the market. Frogwares, which has been creating Sherlock Holmes games for more than two decades, recently released a sequel to its Lovecraftian series The Sinking City. The successful studio AB Games, founded by a former GSC employee, specializes in mobile HOPA games. A fresh example of success is the Ukrainian friend-slop game Dear Passengers, which gathered more than 2 million “wishes” on Steam and entered the top 5 most anticipated games.

In addition, Ukraine is home to regional offices of major international studios such as Gameloft (Asphalt), Wargaming (World of Tanks), and Ubisoft (Assassin’s Creed, Far Cry), where Ukrainian developers contribute to well-known gaming franchises. Another category is outsourcing companies that provide a variety of services (art, QA, porting) for Western developers. Ulysses Graphics helped create art for Hogwarts Legacy, Call of Duty, and Borderlands 4, while Pingle handled ports for Five Nights At Freddy’s, Life is Strange, and many other projects.

Layoffs and adaptation: war-related challenges for Ukrainian developers

Staff cuts in Ukrainian studios are a direct consequence of the same problems affecting their Western counterparts: an overheated post-pandemic market that has started to cool down. This is especially true for large companies that expanded aggressively during the pandemic. The top five largest companies between 2021 and 2026 reduced their staff numbers by almost half. For example, Ubisoft, which had 1,211 employees in Ukraine five years ago, now has fewer than 600.

For Ukrainian studios, the situation is made significantly worse by the war. At the start of the full-scale invasion, outsourcing companies faced an outflow of clients. Western customers saw major risks related to possible shelling, power outages during blackouts, and the mobilization of key employees. This created a threat of missed deadlines. To reassure clients, studios introduced various measures: they installed generators, provided staff with EcoFlow units for remote work, and opened offices abroad, particularly in Poland, so that projects could be shifted to an international team if needed.

The crisis affected not only outsourcing companies, but also firms that develop their own gaming products. GSC Game World evacuated part of its staff at the beginning of the war and opened an office in Prague to keep working on S.T.A.L.K.E.R. 2 without interruption. Other studios, such as Wargaming’s Kyiv office, equipped their premises with industrial generators and even anti-nuclear shelters for protection.

Thus, rising prices for gaming hardware are not the primary issue for Ukrainian developers, because they face far more serious existential challenges. Even so, companies have learned to operate in the new conditions, although the industry crisis and the war are still ongoing.