The Woes THE WOES

1. Outsourcing

The once controversial (and now traditional) primary means of offsetting this expense, i.e. outsourcing low-to-mid-level coding and graphic development, continues, but the pace of the savings have failed to keep up with the cost of remaining competitive.

For one thing, outsourcing is difficult to scale. Each externally-developed component requires mid-level management, straining the talent pool precisely where it is typically most vulnerable: the creative leadership. Video games are not automobiles. You can outsource production of level design or texture development, but in an artistic enterprise, that outsourcing comes at a cost to innovation and quality control. It requires much more finesse and attention to detail to successfully manage multiple, cross continental game design teams than to import ready-made bucket seats. And the publishers who are most successful at this tend to be those who already have an edge in the market, making it that much more of a losing proposition for studios "on the rise" to catch a break in AAA.

2. Extended console cycle

AAA game development requires a broad base of potential players. No one is going to sink millions of dollars into designing games for a platform for which no one is willing to buy games. Unless that developer is Sony and that platform is Vita, but I digress.

Historically, there have been two or three concurrent AAA platforms. In the United States, as of now (i.e. "current gen") that platform is the Xbox 360, and to a lesser extent the PlayStation 3. These are two platforms inching into their 8th and 7th years, respectively. By the time the next generation of consoles hits the market (experts agree this will happen either late in 2013 or in early 2014 for the new Microsoft console) the current gen will be a decade old. That's more than twice the usual lifespan for a home gaming console.

On the one hand, the longevity of the current generation is a sign of the popularity of the games for the generation. In theory, it makes developing AAA games for these consoles relatively low-risk and somewhat less expensive. In practice, however, these gains are marginal, and are offset by the reduction in "wow" factor of games that look so much similar to games released almost a decade ago.

Developing AAA games for a decade-old console is, by definition, devoid of innovation, and this innovation deficit is opening the door for the PC platform (which continually innovates) to steal market share from AAA consoles and siphon off the attention of the hardest of the core gamers. New technology like Intel's Ivy Bridge processors are providing a compelling excuse for hardcore influencers to spend their gaming dollars on PC platforms and games, instead of on far less graphically impressive console titles.

Not only does the widening technological gap between consoles and PCs siphon profit and attention from AAA games developed for the consoles, but it puts the major publishers into a double disadvantage considering the staggering losses they generally attribute to developing strictly for the PC. Multiple sources speaking anonymously have pegged the PC game piracy rate at close to 90%, meaning only 10% of the people playing AAA games in the PC platform have actually paid for it. A new generation of console tech would cut that source of attrition off at the knees.

3. Graphic reach

One of the biggest fears about the upcoming console generation is that in spite of nearly 10 years development over the last gen, the graphical improvements just won't be all that shiny.

Ever impressive graphics are to most AAA games what ever larger explosions are to Michael Bay films.

As the goal of producing photo-real graphics approaches, there is very little room left for practical innovation. It seems very unlikely that the next gen will represent as significant a graphical leap as the last gen, and it's entirely possible the advances will be so slight as to be unnoticeable to most consumers. What this means on the ground is that your average gamer (i.e. the "broad middle") will be unlikely to see the next gen as a significant enough advancement to warrant investment. Early adopters will be few, and some consumers may skip the generation entirely. Which means some publishers and developers may skip it entirely as well.