Former Assassin's Creed director says AAA studios "mistakenly" throw people at problems when "the future lies in smaller teams"

Alexandre Amancio, former creative director on Assassin's Creed Revelations and Unity, warns that large AAA studios have been 'mistakenly' trying to solve development issues by adding headcount and argues the industry should shift toward smaller core teams complemented by outsourcing or co-development. He cites escalating budgets — noting GTA 6 is rumored to have cost over $1 billion to date — and points to examples such as Sandfall Interactive's Clair Obscur as a model that could reduce cost variability and sales-expectation risk for major publishers.

Analysis

Market structure: Smaller core teams plus outsourced co-dev benefits vendors that supply dev services, QA and tooling while hurting high-fixed-cost, in-house AAA publishers. Direct winners include outsourcing/middleware/software (Keywords Studios KWS.L, Unity U, Autodesk ADSK) and platform owners (MSFT, SONY, NTDOY) that capture distribution margins; losers are large integrated publishers (TTWO, ATVI, EA, UBI) whose break-even sales rise when fixed headcount is high. Expect a rebalancing over 12–36 months toward more mid-market releases and lower single-title revenue concentration, reducing pricing power for blockbuster-dependent firms.

Risk assessment: Tail risks include a blockbuster flop triggering a >10% market cap markdown for a major publisher, accelerated unionization raising labor costs >5–10% industry-wide, or IP/control disputes with outsourcers; any could force write-downs within quarters. Immediate (days) risks are layoffs/reorg headlines; short-term (3–6 months) are guidance revisions at earnings; long-term (1–3 years) is structural shift to variable-cost models. Hidden dependencies: marketing spend, platform revenue share (30%+/store), and tech stack lock-in can negate theoretical cost savings.

Trade implications: Favor 6–12 month tactical longs in dev-services and tooling (KWS.L, U, ADSK) and underweight big publishers (TTWO, ATVI, EA) that carry fixed-cost risk. Implement pair trades (long KWS, short TTWO) and one-way options to express convexity: buy call spreads on KWS with 6–9 month expiry to cap capital at risk. Rotate portfolio 2–5% from big-publisher exposure into software/services over next 30–90 days, reassessing at the next earnings cycle.

Contrarian angles: Consensus understates integration/QA costs of distributed development and overstates immediate scale advantages for indie teams — fragmentation can increase time-to-market and patch risk, benefiting platform holders who monetize post-launch. Reaction may be underdone for service providers (they gain recurring revenue) and overdone for an all-in short on big publishers; historical parallels with VFX outsourcing suggest consolidation winners emerge (KWS-like) while many small vendors fail, so pick profitable service vendors with diversified clients.

Key Decisions for Investors

• Consider establishing a 2–3% long position in Keywords Studios (LSE:KWS) within 30 days; target +30% total return over 12 months, stop-loss at -15% of entry to limit idiosyncratic risk.
• Open a pairs trade: long KWS (2% portfolio) and short Take-Two Interactive (TTWO) (2%); target a 20% relative spread improvement in 6–12 months, cut the trade if the spread moves against by 10%.
• Buy a 6–9 month KWS call spread sized to 0.5% of portfolio notional: buy ~25% OTM calls and sell ~60% OTM calls (or equivalent delta structure) to express upside with defined max loss; close at 50% of max profit or by expiry.
• Reduce large-cap AAA publisher exposure (ATVI, EA, TTWO) by 1–3% of portfolio over the next 60–90 days and redeploy into software/services (Unity U, Autodesk ADSK, KWS); reassess after next quarterly earnings or if a major title guidance cut >5% occurs.
• Monitor unionization/regulatory developments and studio-level write-downs over the next 3–6 months; if an industry-wide labor agreement implies >5% incremental cost to publishers, trim publisher longs within 30 days and reallocate to outsourcing/tooling names.