I've seen entire game studios get caught up in a "manic depression" style of game development. They crunch for X days a week/month, and during their non-crunch time devs still come in but don't get much done. It's totally possible to push an entire studio in this direction.
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If you push the crunch too hard, people get tired or burned out so on the off-days they basically push the mouse around but don't do much. Which then makes crunch time even harder and more necessary.
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Once you introduce the concept of crunching into your organization it's a rush to the bottom. You've now introduced a culture of fear and you've devalued everyone's time. You're also now in very dangerous waters because you can easily overwork your staff leading to endless cycles
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Ultimately, your best people will leave unless you pay them a lot of money in studios like this. The end game of a game studio that crunches is one with less experienced staff overall. Everyone knows they're going to crunch so they don't bother working as hard during normal hours
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The less experienced staff makes mistakes that otherwise wouldn't happen, or takes longer to do things. It's a big positive feedback loop. I expected the game industry to have figured all this out many years ago, but it hasn't.
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At several companies I've personally watched the execs sneak out during crunch time. Everyone figures this out quickly and it causes anger and disrespect to be directed at management. It's very unhealthy to a studio.
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Crunch-based studios burn through talent. Word quickly gets around that your studio crunches endlessly and it hurts your recruiting. Senior devs avoid your studio like the plague because they want to work to live, not live to work.
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Crunch-based studios also push their developers into drugs, alcohol, or caffeine addiction. Sometimes the added chronic stress causes physical illnesses such as IBS, etc. Unhealthy employees take more sickdays leading to more crunching.
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I would argue that crunch-based studios are fragile systems. It's tempting to the execs to push just a little bit harder to get what they want. If they push too hard the whole thing snaps and you get a bunch of bad press that totally wrecks your studio's reputation.
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