Arrested Development

It’s April 2020, and the COVID-19 outbreak is officially a global pandemic. An estimated 3.9 billion people worldwide are under stay-at-home orders of varying severity. And with outings to the bar or the theater out of the question, people are starved for entertainment choices. Video games are an unexpected, stress-relieving savior. With a smartphone, console, or computer connected to the Internet, consumers have thousands of titles at their fingertips — all without leaving home.

Under those circumstances, it’s no surprise that the video game industry experienced a surge in demand. According to the World Economic Forum, the market exploded by 26% between 2019 and 2021. Mobile gaming was particularly fertile ground, growing at 1.7 times faster than the broader market.

Buoyed by roaring profits and optimistic economic forecasts, gaming giants launched a season of high-profile mergers and acquisitions, including Microsoft’s record-setting purchase of Activision-Blizzard for $69 billion. But the flush times didn’t last. As COVID-19 restrictions were lifted, the industry experienced a post-pandemic slowdown, and while revenues eventually steadied, they were a far cry from the glittering projections of 2020–2021. That, plus high-profile game failures, studio closures, enormous AAA game budgets, AI-driven market squeezes on essential hardware components like RAM, and myriad additional factors, contributed to the professional bloodbath still afflicting the industry.

Cutting Costs, Managing Risk, and Meeting Demands

Given the scale of industrial cost-cutting, it’s no surprise that localization partners are seeing changes to demand and work expectations. Those changes, however, sometimes bring in more work for external partners, not less.

“What we see in practice is that work isn’t disappearing; it’s shifting,” said Lionbridge Games Managing Director Tugdual Delisle. “As internal teams fluctuate, studios rely more on external partners for flexible capacity and specialized expertise. Instead of large permanent in-house teams, they want partners who can scale up and down without losing quality, continuity, or institutional knowledge.”

Despite that shift, Delisle said that customers’ buying behavior has tightened, and cost, speed, and return on investment (ROI) are increasingly scrutinized. It’s also impacted how publishers and studios prioritize releases.

“Studios may pause a new IP and double down on a live service title that is performing well,” Delisle said. “In those cases, the work will shift rather than disappear.”

Lionbridge Games has responded to the volatility with its own business discipline. A broader portfolio, for example, means less reliance on the fortunes of individual titles. And the studio has focused on improving its own technology for faster, more consistent results, using investments more as resiliency tools than cost-cutting mechanisms.

García, too, has seen a shift in service demands at Terra, and in turn, she and her colleagues are finding new ways to add value. Clients are feeling the cost pressures, and they’re looking to save money however they can, including through artificial intelligence (AI) integration
into localization workflows. Terra staff have also seen less emphasis on transactional localization services and more demand for localization quality assurance (LQA) automation workflows, local marketing and culturalization services, and AI readiness and workflow optimization consultancy.

“Believe it or not, the gaming industry hasn’t been the fastest in adopting AI,” García said.

Given the trend toward aggressive cost-cutting, one might assume the industry’s business class would be bullish on AI. Video games, more than any other expressive medium, stand at the intersection of technology and art, and that unique dynamic can create tension, both internally and with fans.

“Gaming companies deeply care about their users, and they are very cautious when changing workflows that might have a negative impact on the player experiences or brand reputation across the globe,” said García.

That caution is understandable. For one thing, opinions on AI are split within the industry. According to the 2026 State of the Game Industry Report, 52% of developers believe AI has a net negative effect. And generative AI in particular can spark public relations firestorms. For instance, Larian Studios, the beloved developer behind the critical and commercial smash success Baldur’s Gate 3, faced unexpected and unusual fan backlash this past December and January over AI-generated concept art and placeholder text for its upcoming role-playing game Divinity.

Studio size and ownership influence AI approaches, too. Thanks to relatively open platforms like Steam and Itch.io, small, independent studios and even individual developers are thriving, covering niche genres and occasionally producing breakout hits like Slay the Spire or Hollow Knight. According to García, these studios tend to place a more pronounced emphasis on artistic integrity and want human processes centered.

“They want all parts of the process to be equally treated, including localization, dubbing, and LQA,” she said. “Indie developers also have more freedom to make decisions regarding how they spend their budget, while major studios have more restrictions. Another important factor is volume; indie games usually are not so big, so the localization cost is typically more contained.”

Serving Studios of All Shapes and Sizes

AI policy isn’t the only factor that distinguishes studios. Indeed, Delisle has noticed more trends based on studio and budget size. While certain pressures like cost, turnaround times, and reduced internal localization staffing are consistent, other business demands vary.

Indie studios, often looking to expand quickly, have immediate global ambitions but need to grow from fewer launch languages. They also depend more on localization partners’ experience to shape decisions and strategies, Delisle said.

Developers of mobile games, which account for a full 49% of the industry, often focus on continuous development cycles that keep players hooked. Their games require continuous localization work on new updates and content, which prioritizes speed and operational efficiency. According to Delisle, when times are tight, business leaders often choose to prioritize already successful mobile titles and similar live-operations games.

“Testing and QA focus more on cadence, regression, and live operations instead of milestone-based certification,” he said. “Our ability to support games across their full life cycle, with teams who already understand the product, helps absorb those shifts smoothly.”

Then there are the major studios — either third-party players with massive IPs or first-party studios controlled by platform owners like Sony or Microsoft — whose demands shift based on project budget size.

Mid-tier releases often bring phased launches, selective language rollouts, sharper market targeting, and flexible development. And in the big-budget AAA space, Delisle finds that teams are consolidating around fewer partners that can handle localization, LQA, testing, audio, and live operations. Large games typically come with multi-year road maps as developers fix bugs, tweak game balance, add content, and respond to player feedback.

“Because we work across AAA, mid-tier, indie, and live-ops titles, we see the contrasts between segments very clearly,” Delisle said.