I don't think this current model can continue as it is

but I don't think it'll suddenly die either.

It's more likely as franchises get pushed out of the picture, they are reinvented in another form.

For example, they could downsize onto mobile platforms or online games (Steam) where their residual brand power will still guarantee them enough sales to be profitable at that smaller level.

I think it'll be gradual, where the AAA continually decrease as games like Tomb Raider, Hitman, Resident Evil lose out to Call of Duty, GTA, Assassin Creed,etc. and are forced to seek another revenue model. As they find other successful ways to monetize their IPs more and more will move to that model leaving just the biggest franchises making their $100-250m games. But in the end people will tire of them and no publisher will risk making huge AAA games for new IPs when they can be more sure of profit on whatever new revenue model has been established. Whatever new model that turns out to be might ultimately turn it's biggest successes into AAA titles but those will be fewer and farther between.

Which despite what JohnLucas says, whatever model saves our beloved IPs, it won't be WiiU.

I think what Ubisoft is doing with Rayman Origins/Legends/Valiant Hearts/Child of Light/Rayman mobile games. These games are (look) great, are a ton of fun and are likely dirt cheap to make (compared to another Assassin's Creed game). They are easy to port to all platforms (even mobile) and even selling in low volumes can be profitable.
Just Dance is another Ubisoft series where they thought outside the usual AAA paradigm box and while it's massively popular could be profitable with very low sales. Maybe we'll see Prince of Persia brought back in this fashion (UbiArt framework) as well (at least on mobile/downloads).

When you try to emulate Hollywood WITHOUT having box office and charge over 6 times for your product than Hollywood does, AND also miss other revenue streams, you are asking for serious trouble.  And guess what they are doing now?

This thread feels like something I have been echoing awhile.  I guess word about Square-Enix missing with titles that people thought were really good is a wake up call.  Combine with discussing Nintendo and others, and it is, "What now?"

I do welcome the Indie uprising, and welcome any fans of Indie stuff to go to caders.com and join the Facebook group I have that is for Indie stuff.  Yes, I did a self-plug there.

At any time, a AAA franchise can just fail.  Look at Activision and Tony Hawk and the whole music instrument craze.  Withing like a 2 year period, a hot genre dies off.  It happens.

Thing is getting the realistic expectations are tricky.  Everyone on these AAA projects end up thinking their game is the next big thing, and they get caught up in a bubble of expectations.  And when it comes to bubbles, well...

Publishers are going to have to find a balance, and not make a games focus i going graphics, and focus more on smaller titles that balance cost with profit.

I've thought this for atleast the last 3 yr's.

What AAA or AAAA(lol) games have totally flopped? I can think of THQ the company, but most of the big, expensive games have at least broken even. Which will keep them in business, but also slow them down.

They grow as big as their budget allows, then will start shrinking again. It's like Hollywood. Actor's salaries were sky-rocking in the 90's from jumping from 1 to outstanding 2 million with Danny DiVeto with then hit like 20 million with Jim Carry. Supposively Sofia Vergara, whoever she is, is currently the highest paid actress at 30 million. But the point is they haven't changed much in 20 years. They hit a plateau.

Bug budget games will do the same. Remember how much they said Microsoft spent on Halo 4? Either it is worth it for them to continue or it's not.

I think we will continue to have adjustments - like the gaming companies that unfortunately will cause the list of companies to shrink, but then there is a new Minecraft around the corner every decade or so. Hopefully Capcom can regrow as the new Monster Hunter and Lost Planet come out.

But if they go under, perhaps there will be that new long awaited Mega Man game.

The only thing worse than a crash would be creative stagnation for the sake of costs...
Correct me if I'm wrong, but I think Call of Duty is a decent example of this...
Since the emphasis is on a multiplayer experience that never changes radically, they don't have to put nearly as much care in the single player experience, even if they might claim that they do, because they aren't expected to provide a robust single player experience...
As an added convenience, they already have an engine they can use; would that not cut time and costs (again, correct me if I'm wrong)???
Anyone buying a new COD game already has very firm expectations, and any deviation may not be welcome...
The same can be said for Mario, GTA, Final Fantasy, and Halo, to name a few...
I buy Mario games because I love them, but I still expect to play games that provide new experiences...
But if developers rely completely on predictability, what will happen to progress???

I see your point but to say that games like Rockband and GH just died off is completely ignorant. They both had their online infrastructure in place to allow the players to purchase and even sell their own songs. The publishers built up and tought the players to buy DLC songs over the years and so after they got bored with the original set list they went online to get more songs they wanted. They gave the consumers choice and the ones that loved the series loved buying DLC.

As for Tony Hawk, Activision lost the bet on its own motion peripheral and then just made a second game to get rid of the excess boards. A couple friends liked the HD remake but to say that this triple A franchise is dead I think is an overstatement. The only other Skateboarding game that is relevant now is Skate and I think that if Activision makes a new Tony Hawk game for the gen 8 consoles before Skate 4 comes, then you will see how popular Tony Hawk still is.

They don't even bother with releasing shovelwares on WiiU like they did with the Wii. So, they won't have that extra disposable income.

We're going to end up with low and high tier games this gen and all mid tier will die off. Just like the middle class.

The model won't die, we'll just see lower budgets.Games like cod/uncharted/halo can be profitable with their budgets

The costs partly come from the graphics, but is really isn't even that.  I do believe the influence of Hollywood is impacting stuff here.  The videogames industry wants to be like Hollywood and ends up trying to do things that work counter.  They also run large marketing budgets to, that make little difference in the scheme of things.  And this isn't about the visuals either, although that is part.  It is hiring very large teams and trying to do everything with that.  I think also there is a belief that large teams make you less vulnerable to things.  There is likely turf wars for staffing.  And I think the drive for open world is going to feed into this also, with a bunch of stuff pulling off APBs.