Video game makers aren't victims of the recession; they have a bad operating model

Slate.com - What's killing the video-game business?

Video game makers like Electronic Arts and Blizzard have reported large losses recently-- considered a sign of the times-- except that games are selling better in 2008 than 2007, and for the first time even better than DVDs. Sales are high, but the costs of making the games are even higher. The cost to develop high-tech games have ballooned into $15, $20, even $40-million enterprises, needing sales of nearly 2 million units to break even. Some games have done so (like GTA IV, Halo, Gears of War 2) but this model is probably a poor one. Some game companies have thought about pursuing a 'Hollywood' model where they make a few blockbusters and then use the profits from them to fund other titles. Van Zelfden argues that this model doesn't translate well to software makers since they retain large staff that they need to pay every month; contrast this with Holllywood that uses sub-contractors for just one project each time. Instead, what is suggested is making a ton of mini-hits, smaller games with less technical sophistication that are constantly being released.