There is now an ever growing gap caused by this gen win or die situation. Back only 4-5 years ago there was an plently of 1st tier (your 1st party and triple A) and your 2nd tier (AA publishers) while an small 3rd tier(indie, mobile market). The second tie feed well off the PS2, with development costs not very high and 100 million+ market you only had to sell an few 100,000 to start making an profit and that is do able when you need around 0.05% of the auidence. 

But Since then the markets have changed, the 1st tier got huge with games like call of duty pumping out 20 million an year now two years running and arouynd 60 5 million+ sellers on the consoles. The 2nd tier haven't been so lucky, Publishers like THQ, altus Atari etc had to endurer an every hitting rise in development costs on the consoles, an once cheap location from the PC which has an still is enduring an graphical arms race has now moved to the consoles. An publishers like take two and zenimax publishing super games like GTA, Read dead and fallout and EA, Activsion and Ubisoft able to push out millions in advertising, there is very little in those 2nd tier moving into the 1st tier which they desperatly need to become seriously profitable an big time. 

The problem with these 2nd tie aiming at the big time is that there is an now point where the 2nd tier publishers can afford to push millions into an game to raise them but if that game bombs then its almost all over in reaching or bankrupty and collapse. Do or Die. And with there being so much risk the only choice is to copy whats big already and capitalise on it, and this has worked with Ubisoft in taking sandbox thats been done by GTA and adding there own elements, but this can fail hard like what Homefront is more than likely going to do for trying to capitalise on call of duty.

And really this is there only chance because 2nd tier games(games that are mid value sold at full price) are on the down even on the Wii only titles from Nintendo sell big numbers with some exceptions, the area of the market is dissapearing fast. But the 3rd tier, once small and unnotisable has exploded with the adverse of mobile gaming thanks to electronic giant apple and now software mega google supporting them with there smart phones and software combined with steam , psn and xbl growing number of cheaper smaller titles have really allowed some small teams to shine. The problem is that its highly competitive with prices very low because of free games and the nature of the platform. An gamers have really moved to these areas now making some indie devs not indie no more.  Thats all good but those 3rd tier games are as good or better than the 2nd tier games sold at more than 1/6 of the price, how do you compete?. 

Basically the 2nd tier devs have two choices: do or die hitting big like above or move into the highly competitve maket like the 1st tier already have and slug it out there. But i expect some of the 2nd tier to try and hit big and alot will fail unless sony, ms and value help the second tier. 

What SONY and MS and Nitendo have to do is make there next consoles far cheaper to produce for and end the graphical arms race driving up development costs and stunting innoviation. This would allow the 2nd tier to be able to produce games more easily and break into 1st tier and also the 1st tier to produce more games and push increased innoviation and then allow the indie devs that capitalis2ed on the mobile front to hit it big on the consoles. What Value has to do in the mean time until the new consoles is cater for the second tier by heavily supporting second tier games that are selling at 30 dollars and encourage second tier to go there and get the exposer on the steam network. 

Because the result will be: more publishers = more games , cheaper cost = better more risker titles = better games. 

While neglecting the 2nd tier and putting the new richer 3rd tier developers out of reach with an advance more expensive to development consoles will close more studios, have less games and what ever games there are wont be innoviative that uses the new specs and even the big studios will start struggling with some closing. Which will end console gaming, or seriously hurt it if no games can be produced for it. 

Sorry but that's bullshit.

Only second tier publishers can save second tier publishers.

But to do so they have to realize that makind dumber clones of AAA games isn't recipe for success.

They need to keep budgets in check, create games that can break even with smaller sales numbers, explore niches left by big boys. Also they need to realize that because they can't match visuals of top titles they need to concentrate on gameplay and/or story while keeping average level of visuals.

We need more Demon's Souls and less Enslaved.

I understand what your saying, but I think trying to do a Homefront is far more likely to succed than create another niche aimed title, there are success like Demon Soul's for sure, but most of them sell below 350,000 ww, and they do require more than that to be financially viable 

creating games like Homefront is the exact way to get into the first tier, they need to get a hook which is different to CoD or Halo and exploit it, sadly Homefront didn't do this, as the creators focused on promoting the games story, but made their AAA experience online, this has back fired in review (they don't talk about online nearly enough) and will lead to lower sales, but with a good word of mouth, perhaps the game can top 1 million on 360 and 700K on PS3 to create a good platform for a sequel and later a brand

creating niche games like Enslaved will not work forever, there are only so many niche games which can be made and ATLUS is having problems because of this, as they release games very similar to each other, but they sell worse now than they did on the PS2, they need to create a new IP and make a brand or otherwise will simply bust in time

No, they need to save themselves. Also, its been proven time and time again you do not need a huge budget to make a big splash on consoles.They dont need help making more costly games. They need to learn to use what they have to do it.

never said they need help making costly games. sony, ms have to lower development costs by next console generation

development costs wont be going down lol as hardware improves development cost goes up. the only way to bring development cost down is to bring quality down, which is already an option for developers. games like 3d dot game heroes brought development cost waay down and sold their game at 40$ instead of 60$ in NA and they did really well with it.

other than 3d dot game heroes, i can think of disgaea 3 (disgaea 4 will follow suite and do the same) which has cut their development cost and sold for less than full retail (50$ instead of 60$).

development costs go off there wont be another console generation after the next. Even big publishers will pull out. All the Publishers are calling this. If Sony and MS and Nintendo release High tech conoles with high dev costs it will be one of the biggest commerial sucides ever. I am calling it. 

Oh I see must have read wrong or whatever. I do somewhat agree with this. But at the same time the devs are choosing to go all out even though they are constantly loosing money. With higher tech comes added cost and the battle of graphics is going to lead to very few games. In away the "industry has worked itself into a bit of a corner. However, as the Gen has shown you dont have to go all out to make the big bucks. Sooner or later all the devs hardware/software will reach this point and go out of buisness or adjust. I actually find it pretty exciting. I see more companies focusing on the basics instead of pure horsepower in the future. Im sure we will still have those big AAA awesome looking games, but there time of being the norm is ticking away.

Thinking about it a little more I dont recall all the good NES/SNES/GEN/PS1/etc games pushing the limit like has been done this gen. They need to learn to be more selective again. Only push the games you know almost 100% you will get what you spent back and more.

yes thats what i want as well, the end to the arms race with graphics because the wowness of graphics last somewhat 10 minutes then its down to gameplay. 

But the consumer and media has to change to allow for graphics to be not essitental. first the Media must stop focusing on graphics any more. Epic and Crytek should start making engine easier to develop for and the consumer must learn that graphics aren't everything and manufactures going "thats it, we are stopping at this point with graphics, if you want to push the limits the PC is the place to go". I say finish at this level of graphics we have now and we can see an boom in innoviation like we haven't seen in years on the consoles like that is occuring on the iphone.  

no you have it wrong, Sony MS etc don't need to help the 2nd tier the seccond teir just need to stop trying to compete with the top teir at their own game. the top teir are the top teir because they have the money and experties to create the biggest and best games. A seccond teir dev trying to to make a a top teir game will always be highly risky and will probably fail, And the top teir subsadising financial risks by seccond teir devs is unsistainable, hell they already have to subsedise the top teir to allow them to do what they do and creating more competition for your own product is stupid.  

Developers just need to learn to spend only what they can expect to make from the game and not to bet the farm on a single game. This means not aiming for the stars with every game and not trying to play the same game as the big kids. They need to learn to start small and build up, the top teir weren't always making AAA titles they started small and built up over time or they were set up with huge ammounts of financial backing to create those type of games. There is no way for a seccond teir dev to compete without first teir resources and they shouldn't try. Seccond tier developers should make seccond teir games for seccond tier budgets. Many developers are very successful with smaller games, look at Paradox interactive a PC only publisher that deals in 2nd and third tier games yet is going from strength to strength and making reccord profits, profits were up 300% last year not because some big organisation helped them out but because the games they made were made with reasonable budgets. 

Developers just need to learn to develop effeciantly, it has nothing to do with how powerful the hardware is or anything like that. Hell if you think that powerful hardware is the main reason for developers spending so much money on making games you have not read about Shenmue the game on the Dreamcast a game that cost well over $47 million to develop and that's 1999 money with inflation that's over $62 million far more than even most AAA titles today, and why because of inifeciant development practices. Today games like uncharted 2 can be made for as little as $20 million.

Trying to make the next bigest best game arround has always been and always will be a risky move and developers and publishers that can't afford to take the risk shouldn't be making the risk. And other bigger companies shouldn't be trying to catch them when they fall.