At a time when the video game industry should be having a banner year, next generation consoles could be cutting the bottom line short on many third party companies.
According to research firm NPD Group, last year?s total video game hardware, software and accessories sales were at a record $10.5 billion. But game-developers are hurting nonetheless, because with each new system released, development costs tend to double. With all three major companies pushing for new consoles later this year, third-party developers find themselves in a tough predicament.
“There are many, many things that are happening that are not normal,” said Michael Pachter, an analyst with Wedbush Morgan Securities.
In addition to the greater costs of production, video game sales have increasingly dipped as the new systems draw nearer; the reason being that consumers are beginning to see the older systems as obsolete. Another problem lies with the next-gen consoles being designed specifically for high-definition TVs while it?s still unclear how many people will actually buy a new TV just to get the most out of their games.
Doug Lowenstein, the president of the Entertainment Software Association, insists the industry’s troubles are “cyclical and entirely predictable.” The important thing, he claims, is that the overall popularity of video games has never been greater and will likely continue to grow.