- Naughty Dog was sold to Sony in 2001 due to financial pressures
- AAA game budgets skyrocketed, reaching $45-50M by 2004
- Selling ensured stability and resources for future game development
Today, the gaming community sees Naughty Dog as a part of Sony, but this has not always been like that; once, the studio used to be independent.
From Independence to Partnership
Founded in 1984, Naughty Dog started out as a one-man army and is known for creating many iconic games like The Last of Us, but by 2001, the studio was acquired by Sony, and the rest, as they say, is history.
What led to this decision? This question has never been answered until now. It was addressed in a detailed post shared on LinkedIn by Andrew Gavin — co-founder, first spotted by Gameranx.
Gavin initiated the write-up by saying, “Why did we sell Naughty Dog? It’s a question I’ve been asked countless times.” and answered that it happened due to financial pressure, which influenced the company to sell to Sony, “The answer is simple: budgets were skyrocketing.
The Rising Cost of Game Development
In the early days, the budget for crafting games wasn’t like a pain in the back and was relatively modest. However, the cost flared up with the technological advancements and growing expectations of AAA titles. Andrew gave a quick cost analysis in the post, mentioning that:
“When we started Naughty Dog in the 1980s, game development expenses were manageable. We bootstrapped everything, pouring profits from one game into the next.”
“Our early 80s games cost less than $50,000 each to make.”
“Rings of Power (’88-91) saw budgets rise to about $100,000, but yielded slightly more than that in after-tax profits in 1992.”
“In 1993, we rolled that $100k from Rings into a self-funded Way of the Warrior.”
“But Crash Bandicoot (’94-96) cost $1.6 million to make.”
“By the time we got to Jak and Daxter (’99-01), the budget busted the $15 million mark.”
“By 2004, the cost of AAA games like Jak 3 had soared to $45-50 million — and they have been rising ever since.”
“But back in 2000, we were still self-funding every project, and the stress of financing these ballooning budgets independently was enormous.”
Why Sony? The Strategic Decision Behind the Sale
While Naughty Dog could have likely continued to survive on its own, considering the surging development cost and fear of failure and bankruptcy pushed the company, and it could not resist the chance of joining hands with Sony in 2021. Gavin further said,
“Selling to Sony wasn’t just about securing a financial future for Naughty Dog. It was about giving the studio the resources to keep making the best games possible without being crushed by the weight of skyrocketing costs and the paralyzing fear that one slip would ruin it all.”
The decision was not solely about money but to gain the resources and sense of stability which is quite necessary for any company to survive in the competitive and expensive industry.
Most importantly, it assists the studio in focusing on development rather than worrying about the resources. Andrew called this move a “right call” and ended the post by saying,
“AAA games have only gotten more expensive since then. Today’s big-budget games can easily cost $300, $400, or even $500 million to develop.
Would we have been able to keep up? Maybe. But selling — to the right party — gave Naughty Dog the stability it needed to thrive — and to continue making the kinds of games we’d always dreamed of!”
