Big Ant studios paying $1,200,000 a year on staff costs that's insane! The game's Big Ant make don't even come close to costing 1 million to make, not even $500,000!
$1.2m in staff costs would buy you about 9 people, based on standard industry rates. For one year. And that's just the core game team: not equipment or offices or admin staff or management or QA or Audio or Marketing or...
So yeah: that IS pretty insane - You are crazy underestimating how much it costs to make a video game.