Well I think the true increase in the costs of development is largely under reported because even though they claim game development costs have increased 2 to 4 times of the cost of games in the previous generation, the average length of most games is 1/4 to 1/2 of the length of games in the previous generation; being that the largest portion of game development is creation of the graphical assets, and the quantity of graphical assets needed is directly proportional to the length of the game, it is fair to say that these development costs are much higher than the 2 to 4 times we have seen reported.
Now, the unfortunate thing is that large publishers (for the most part) are not the ones who will be hurt by this increase in development costs. Like EA, most large developersrelease sequels to large franchises on a very regular basis and can afford to build a library of 3D graphical assets over years with only a moderate increase in their overall development costs. Smaller developers don't have the luxury of releasing 4 versions of the same racing game or shooter in a generation, and the development of all of their graphical assets has to be recovered upon the sale of the game they're used in.
As I've said before, the important thing isn't that all third party publishers cut back on their development costs and focus on more modest graphics, but I do think that it is important that developers only invest as much money as they can truely afford to on the games they're producing.
