UK is quickly becoming a much bigger and more important market.

Well, that's Post blizzard right?

Pre-blizzard, if PS360 died then it would really hurt the business.

If anything, It's Blizzard that would be keeping Activision alive if PS360 dropped dead.  Correct?  Since Activision relies heavily on Call of Duty and GH, the former which sold almost nothing on Wii, and the latter which sold pretty well on Wii.

US developers better not start making games purely for the UK market

Since a good bit of this post was responding to me, I'm going to respond to it.

You're right, it's not as simple as "let's just make everything on Wii and it will be all sunshine and daisies." No one in this thread said that (as far as I can see). Successful companies today are as such because they have a highly casual strategy (Nintendo, Sega, Activision, Ubisoft). World at War bombed on the Wii because the last iteration wasn't on the Wii (the one that made the series as popular as it is) and at first, it had no marketing. The hype that carried over from Call of Duty 4 to 5 was almost entirely PS3/360/PC, which explains why the PS2 version is also bombing. Besides, if The Wii (And DS, PS2, etc.) have taught us anything, it's that you can't judge a game by its first couple weeks. If you need some examples, I could give you quite a few.

By the way, how long you will be around doesn't have any effect on how much influence you have. One oak tree will have a longer lifespan than all the grass in the world, but I assure you that the grass will have a far greater influence over the ecosystem than the tree. Besides, how will most of the western developers we see today be dead in 5 years? The ones who will be dead are the ones who AREN'T selling millions of copies. Companies like Midway, Atari, Eidos, etc. have been in financial danger for a long time now, and the higher development costs/weakening economy have sent them over the tipping point. Good riddance, I say. These companies have also been around for a long time as well. Many of these western companies that are struggling have been around for many years and will continue to be around for many years.

It's not like western developers are the only ones struggling anyways. Nearly every Japanese company has merged with another and shared their IPs just to stay alive. Konami is pretty much the biggest Japanese developer, and the main reason they're successful is because most of what they release is music and sports games (which goes back to my earlier point). Sega has been struggling to make profit even with the huge success they've had this generation. How do you think smaller developers like Square Enix and Capcom are doing? They've likely been surviving off spinoffs and moneyhats.

While we are in a recession, the game industry is experiencing enotmous growth. I think YoY the total revenue is up 20%.

The HD development model is clearly unsustainable. If an average game will only break even at 1 million copies (let alone see a significant ROI) there's something terribly wrong with the industry.

Sure the Assassins Creeds, Gears and GTA's will earn a nice sum of money, but even something like Prince of Persia looks like it's going to make a loss. Despite it will likely end up selling a million.

Most Japanese devs have focused on DS, are increasing their Wii development and are having less HD games. For some reason Western devs are unwilling or unable to shift their focus to Nintendo's consoles.

Last week japenese top 10

Layton, point and click adventure

AC, Sim game

Dragon Ball Z, fighter

Kirby, platformer

Winning eleven, sport

Wagama fashion, errr "other"

428, interactive novel

Pokemon, RPG ..kind of

Fallout 3, RPG, a western one...

Tengoku Gold, rhythm game

So much for that theory.

LucasArts' Fracture is the perfect example of why these companies are performing so poorly ...

When you produce a game for $20+ Million and see (combined) sales in the 100,000 units range you dig a hole so deep that it is difficult to climb out of; regardless of whether you have a couple of big games (Lego Starwars/Lego Indiana Jones)

I am becoming increasingly convinced that this is because msot Western devs prefer to treat consoles like PCs, and while the Wii is fine as a console it is pretty crappy as far as PCs go.

Oh, I agree, although I probably didn't make it too clear.

The problem that I see on the HD consoles, is that everything that gets made is almost forced into being a graphical powerhouse.  Without the pretty screenshots, these games have no hype and don't sell.  Even if they do have the pretty screenshots, they need to hope that they don't get lost in the shuffle of the big name franchises.  It seems like everyone is trying to make a big budget blockbuster.  The industry can't survive like that.  There needs to be a lot of low to mid budget games to support those big blockbusters.  Those games don't exist on the HD consoles, and I don't seem them ever being made, or selling, given a userbase that is so graphically obsessed.

I don't see that as a problem for the Wii.  The bar is set lower graphically, so much smaller budgets can make an average looking Wii game, and it doesn't take as much effort to really stand out if you have the budget.  Lower development costs have meant that niche games can and do make money.  That's what we really need.  Profitable games.

I just don't see 360 and PS3 fans accepting lower budget games for the sake of profitablity.  They have been spoiled by an unsustainable business model.

I feel sorry to say that, but they had what they deserved. Some companies really have a shitty behaviour, like eidos releasing a demo only for 360's owners, or some developpers than don't add trophies to their games, etc etc etc