Media analysts Screen Digest’s latest report, “Next Generation Consoles: Games publishing, hardware analysis and forecasts to 2010,” shows game publishers will have an increasingly difficult time getting a return on their next-gen development investments, due to rising costs and small user bases.

Screen Digest based their findings on the sales of games required to cover development costs in the U.S. market. Their results indicated only a small amount of next-gen titles are likely to make any money in the near future.

The report also assessed major games publisher’s attitudes toward next-gen games development. Development times, team sizes and complexity have all been exacerbated by the demands of next generation games. To help reduce risk, companies have been employing strategies like outsourcing, creating games for as many platforms as possible, making sequels to popular titles and producing games based on movies.

Sony has responded by doubling its internal development resource since the launch of the PS2. Sony has 14 studios, all but one of which are devoted to developing for the PS3.

Microsoft has forged relationships with third-party developers like Epic to develop specifically for the Xbox 360, a strategy that has been successful with Gears of War.

Nintendo has focused on innovative gameplay rather than high definition graphics, making Wii games cheaper to develop. Nintendo is also trying to make games accessable to a wider range of consumers.

Screen Digest has concluded that the combination of Sony’s investment in next generation development and PS3 positioning strategy will enable it to build the largest user base by 2010.

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