We don't need super high quality graphics for every AAA production. Sometimes, Just good enough graphics, but with better interactivity with the environment like ToTK and Baldurs Gate 3. I mean , I love RDR2, but honestly, shrinking horse testicles is a bit too much attention to detail.
As an example, cell shading of ToTK still looks amazing and far more enduring as a graphics style. Also, Elden Ring, arguably has worse graphics than RDR2 or the latest CoD. But, because of it's amazing art direction it will age pretty well.
I'm done giving developers a pass for not even putting in the minimum. Larian and Bethesda didn't even put horses in their games because they're so afraid of rendering the sack.
Everyone says Phantom Liberty will finally redeem Cyberpunk, so I can only assume CD Projekt has spent the past three years creating a perfect horse with the most dazzling balls we've ever seen. Can't wait for those RTX and DLSS 3.5 rendered oysters.
The budget is also a marketing ploy. The average person hears about a game costing hundreds of millions to make and they think "well then, it MUST be good". It's more or a pissing contest among publishers. Most of that budget does indeed go to marketing and executive wages/bonuses.
And from the publisher's perspectives, that's really a good investment of the budget, because it doesn't just drive up sales. It also cultivates customer loyalty and fanboyism (e.g. "we are spending all that money because we believe in the game, and we want to give our loyal fans the best experience possible" is a very common line in pre-release interviews).
For example, there's a false equivalency among gamers, propagated by this kind of propaganda: "I have to pay the high prices and engage in microtransactions/DLC, because that supports the game developers and their high budgets". In reality, the people who actually make the game see very little of that money. Their wages, in most instances, are shit and do not reflect the hours they put in. However, gamers rarely want to understand that, and instead extend the publisher pissing contest among themselves ("the game I'm playing now spent more money than the game you are playing, therefore it's the superior product").
Seriously, I worked in media creation and like looking at movie budgets is painful for me cause so much of it is to pay people already at the top and overpaid more than enough.
Production and material costs haven't grown as much as marvel movies would make you think so it is all going to executives lawyers and heads of the sweat shops of special effects houses.
Even if it does, thats still too much money. How much money did Hollow Knight spend on marketing? Or what about Terraria? Or Minecraft pre-buyout? How much was spent on marketing for games like Deep Rock Galactic? I can guess probably less than $100 million each. Maybe even less than $10 million.
You're listing outliers that did well despite their smaller marketing budget. There are tons of great games from smaller studios that get buried because nobody knows about them.
Over the past 5-7 years, the AAA publishers have tried to use production scale as their new moat. Very few companies can afford to spend the $200M an Activision or Take 2 spend to put a title like Call of Duty or Red Dead Redemption on the shelf. These AAA publishers have, mostly, used this production scale to keep their top franchises in the top selling games each year. The issue these publishers have run into is these same production scale/cost approach hurts their ability to create new IP.
They can still have similar production value and not be open world games that take 80 hours to finish. It just makes far more sense to me to bet small with tons of projects than to bet big with only a few, because then you'll find the PUBGs and the DOTAs that Phil is talking about eventually.