Andy Gavin, one of the co-founders of Naughty Dog, has explained why the company sold itself to Sony back in 2001. Posting on LinkedIn, Gavin said he’s been asked “countless times” why Naughty Dog took the deal, and it was all about rising development costs.
Gavin said (via SI) when Naughty Dog first started making games in the 1980s, game development costs were “manageable,” with costs for games made in the early ’80s running about $50,000 per game. For 1992’s Rings of Power, Naughty Dog spent about $100,000. For the first Crash Bandicoot game, however, costs rose to $1.6 million, with Jak and Daxter (2001) coming in at $15 million or more. Just a few years later, Jak 3’s development cost came in at between $45 million and $50 million.
Naughty Dog was self-funding all of its projects at this time, and the stress about “financing these ballooning budgets independently” became too much to bear. Gavin said rising development costs is a “systemic issue” to this day in the video game industry.