Well now, lets see.

Consider how long was bioshock in development, thats how long you have to pay the people developing it.

The computers and hardware needed to develop it (they have to buy these).

Programmers, Story Writers, Modelers, Composers and everyone involved in that area(who do you think makes the music?), Concept artists, the project leader.

Electricity, water and food bills (these do also count).

Etc etc....

Keep thinking, you'll find out that those 20mill do spread out thin.

Game Devs forgot long ago that Fun > Graphics. Which is why games cost way more than they are worth playing.

Bioshock was in development for about 4 years.

http://www.mobygames.com/game/windows/bioshock/credits <- Count how many people worked on it.

Multiply it by what you would pay these people if you were their boss.

Multiply that by two for benefits and other employment costs.

Add four years of rent for a commercial space large enough in the Boston area. Add four years of utilities. Add custodial and physical security services. Add an office manager, a receptionist and computer janitors.

Add furnishing and equipment costs. Add software packages (Visual Studio, Photoshop, 3D Studio MAX). Add middleware licenses (Unreal Engine, Havok).

Exactly why do you think it's so cheap to run a business?

Okay then, which one makes money.

Actually they didn't. Nowadays engine and middleware licenses are extremely common, which allows developers to focus more time and money on gameplay and 'fun' than they previously could. Infinitely more science goes into 'fun' now than in the kinds of games you're probably thinking of. The commentary tracks in the HL2 episodes elucidate this process quite well.

Talking about Source mods, I believe this is worth checking out:

http://www.eclipsegame.com/