"AA" seems to be the sweetspot now. Big enough for economies of scale to kick in, small enough to take targeted risks and avoid scaling issues. And I think software advancements (especially gen AI) are going to make that discrepancy even more extreme, as AAAs lose the content volume edge they have over smaller studios.
it is broken because they are putting in too much money into single titles, and therefore, want to "reduce risk". This basically means following a known formula and IP, because previous success means they're likely to get at least brand recognition for the sequel.
But this means you get mediocre games as it rehashes the same property over and over again.
That's why indie games are so fantastic, because they love risk taking on new ideas.
But the contents and script writing is terrible, or at best mediocre. The ultimate root cause is the fact that the money invested in a single movie is too high, and thus the studio/production company cannot have it fail. So they do everything in their power to make it succeed (financially), even if it goes against an artistic vision.
They are all preordering the next AAA ultimate Edition with bonus cosmetics for $100 after spending the last year complaining about how terrible the previous title from 6 months ago is.
If I had a steady stream of customers willing to pay for garbage, I too would happily deliver.