It’s kind of insane that we’ve seen game budgets go from 5 million to 50 million to 500 million with no signs of slowing down and the AAA publishers are like “this is fine”.
On top of the point that
@Lelouch0612 made that new cost-saving and revenue generative measures helped paper over things, they were also betting big on market potentiality.
With the advent of the first generation of gamers coming of age and having disposable income not managed by their parents, sales ballooned rapidly and certain platform holders and publishers felt free to re-invest in bigger and flashier productions, to squeeze out any potential rivals for those dollars who would not or could not afford to do the same. So with the advent of new technology, "bigger and flashier" became the only means by which they knew how to maintain engagement and (most) platform holders were happy to accommodate.
The Wii and DS demonstrated to everyone that it was possible to cast an even wider net, and that happened right around the advent of the smartphone. It gave an impression that growth legitimately may not have a limit.
But reality has since come crashing down; there does appear to be a maximum addressable market and that has led to the deployment of monetary schemes that extract the majority of revenue from about 10-20% of players (and that's a high estimate, F2P "whales" in the mobile space have frequently been recorded as making up less than 10% of all players), while those that don't follow that racket are suffering from the knowledge that the only method they know to maintain consumer engagement in their maximum addressable market now costs them buckets and buckets of money and try to achieve more with less (read: try to extract more surplus value from their labour pool, with the company's labour demand constantly outpacing growth of the labour pool), which incentivizes them to try and join the racket for the big payout to keep the good times rolling. Meanwhile, indie creators, many of whom were pushed out of the traditional publisher labour force, are taunting publishers by luring customers in with sales tactics they have long since abandoned and publishers presume they cannot retreat to.
In short: Publishers are most certainly NOT fine with how things are, but acknowledge that this is the bed they made and now they have to lay in it, whether they like it or not is irrelevant. And they got here through the lie of perpetual growth, so when growth of potential consumers dried up, they sought that growth elsewhere. Any lack of turnaround from the accepted "norm" to something more sensible comes from fear that their competitors won't follow them and use their "weakness" to squeeze out another rival, a lack of faith in consumers to accept a dialling down of game budgets with positivity, or both.
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