I am seeing bleeding ink and contraction going on with the videogames industry.  I am swearing that the number of studios declining and individuals being laid off.  Am I missing something or is the size of the people in the videogame industry making games for home consoles shrinking at this point?  Does that then mean less studios for next generation?  Anyone able to share light on this?  I am having a bit of a hard time narrowing things down.

I think that the industries will be on the 2 extremes, the indies and the huge publishers. Seeing a decrease of those in the middle though.

I completely agree with this. If dev cost keep increasing we can pretty much say goodbye to new AAA IPs, everything is going to be the CoDs, Assassins Creed, GTA, etc, plus the first party games.

Can't see that happening. Because all the games that will come out early next gen will look like today's games that means less money to make one. Just like what happened with the launch titles for the HD twins.

Then what about the rest of the gen?

The sizes of teams is not decreasing, take a look at this, http://gamrconnect.vgchartz.com/thread.php?id=152843&page=1

As the time goes by the development costs will decrease until it affordable for small developers.

If you look at the link on the post above you, you'll realize that's not true.

Won't happen the next gen will be huge and we will see new developers jumping into the ring like most gens.

Do you remember a game by the name Shenmue ? it cost sega 70 million to make it 13 years ago. Now do you think that a game like shenmue now adays would cost that much ? NO. Because development costs decrease every second.