Former Assassin's Creed director doesn't think the current way of making big budget games is 'tenable': 'I think the future lies in smaller teams'

Former Assassin’s Creed director Alexandre Amancio warns that the current large-team, studio-centric model for AAA game development is unsustainable, arguing teams exceeding ~100 people create management bloat that stifles innovation and efficiency. He advocates a project-based, film-like model—core teams augmented by outsourcing or co-development—to reduce costs and better match crew to project needs amid industry trends of ballooning budgets, cancellations and mass layoffs; the piece highlights structural risk to major studios rather than presenting company-specific financial data.

Analysis

Market structure: The article signals a structural shift away from giant, vertically integrated AAA studios toward lean core teams plus outsourced/co-dev models. Winners: co-development and outsourcing specialists (e.g., Keywords Studios LON:KWS), middleware/engines (Unity U), and cloud/AI tooling (NVDA) that scale per-project. Losers: overlevered multi-studio acquirers that rely on in-house headcount (e.g., Embracer SE EMBRAC-B.ST, some Ubisoft UBI.PA divisions) where fixed-costs and coordination frictions compress margins over 12–36 months.

Risk assessment: Tail risks include rapid unionization or labor law changes (classifying contractors as employees) that could raise effective costs +15–30% for variable workforce models, and a recession-driven demand drop reducing new-game spend 10–20% YoY. Near-term (0–3 months) volatility will track layoffs/earnings; medium-term (3–12 months) risk is execution of co-dev transition; long-term (12–36 months) is industry M&A and tool consolidation. Hidden dependency: IP ownership/franchise control — outsourcing gains value only if publishers retain monetizable live-service rights.

Trade implications: Tactical long exposure to KWS (2–3% portfolio), U (1–2%), and NVDA (1–2%) as secular beneficiaries; pair short EMBRAC-B.ST (1–2%) against KWS (long) to exploit execution risk. Options: buy 9–15 month KWS calls or U long-dated calls (LEAPS) and hedge with EMBRAC put spreads (bear put 6–9 month) to cap downside. Rotate away from cyclical large-cap publishers into services/tools over next 6–18 months.

Contrarian angles: Consensus expects blanket doom for AAA — but big IP owners (ATVI, TTWO, EA) can outsource production while preserving high-margin live services, implying selective longs on AA/AAA publishers with strong recurring revenue (ATVI, TTWO) and shorts on overexpanded acquirers. Watch for M&A: outsourcing firms or profitable studios could be consolidation targets, creating 20–40% takeover upside in 12–24 months.

Key Decisions for Investors

• Establish a 2–3% long position in Keywords Studios (LSE:KWS) within 2–6 weeks; target +25–35% upside over 12–18 months if co-dev outsourcing adoption rises, set a stop-loss at -15%.
• Add a 1–2% long position in Unity Software (NYSE:U) via shares or 12–18 month LEAPS to capture engine/tool demand; target +30% in 12–24 months, stop-loss -20%.
• Initiate a 1–2% short position in Embracer (STO:EMBRAC-B) via shares or 6–9 month bear put spread sizing to limit capital at risk; thesis: overcapacity and write-down risk, target -40% in 12 months.
• Buy a 9–15 month KWS call and finance by selling a nearer-dated EMBRAC call (call spread) or buy a 6–9 month EMBRAC put spread to express asymmetric bet with capped downside; implement within next 30 days around earnings/layoff cycles.
• Reduce combined exposure to pure-play large-budget publisher equities (e.g., reduce non-recurring revenue weight in portfolio by 5–10%) and reallocate to services/tools/cloud names over next 3–12 months as structural shift materializes.