1- I didn't say costs are ever-increasing when you look at it in such fine detail (i.e. your Uncharted-Uncharted 2 comparison). The general trend has been for increasing costs though, and that isn't just true for this generation. Other people in the thread have put it quite well when they called it an arms race. Complexity and graphical detail keeps increasing at a faster pace than revenue growth allows.

2- Sure not all publishers are relying on profits from the Wii, then again most publishers are losing money whether they do that or not. So something is very wrong in the industry.

Now that EA is losing money (with not so great perspectives to improve AFAIK), they can't even easily purchase more studios to increase consolidation in the industry. When small/medium publishers are going bankrupt and the big ones lose their purchasing power what we see is a hard crash.

At least there's the Activision-Blizzard giant which has the World of Warcraft cash cow... And of course there are some other bright spots, but the big picture of the industry is quite bad.

BTW

Look at that factor5 graph again. The explosive curve depicted is project staff, not costs. The costs are reported as labels under each data point. And sure, they increased alot, but in a much less explosive manner than that curve suggests.

For example the last bar is about double than the "Lair" one (+100%), but the costs are only about +33% more. And I think that a game published today can certainly collect revenue for more than a 33% differential with respect to 2007 (Lair time frame).

Costs still increase very fast though. More than doubling in each generation according to the graph (which I hardly believe revenue does). And this is of course supported by the all red ink we're seeing today among publishers.

I'm writing a front page article with a comparison of financial results between the last generation and this one for several publishers. I'm still collecting data but I suspect the conclusions will heavily support what I'm saying now. Here is the data for EA:

http://www.vgchartz.com/forum/thread.php?id=63120

You do realize that EA put close to 400 million dollars into R&D in 2008 don't you?  Which is going to pay off for them years down the road.

Plus one could say that EA has been going through a rough patch for their own sins, saturating the market with yearly updates of their sport cash cows.
The fact that they knew they needed to move on and to renew their image is proved by their "Mirror's Edge"/"Dead Space" new phase. It did cost them a lot in 2007/2008 indeed, but their customers were probably burnt out anyway on sport title iterations.
In other words: those data alone don't make a statistic.

@Rpruett: Did you notice there are already two years with massive losses at EA? What they're doing now is firing people, so their strategy so far is not paying in any way.

@WereKitten: So why is the revenue figure showing healthy growth? There's no problem on the revenue side, expenses are the real problem.

- damn, triple post!

NJ5; Quadrouple post if you must. I am a fan of your articles and the info you provide, very interesting and insightful.

Can't really see that in the figures...

2004-2007 the revenue stagnated. Oscillations of 3% both ways.

Only in 2008 the revenue started going up again, by 18%. Now it's down again by 7%, but we don't know where it would have been without the economic downturn.

Frankly, without detailed data on both revenue and costs you can't make an analysis of the causes. EA is too big... it has even a revenue by the mobile market, that I bet has been growing nicely in the last 3-4 years. Are such detailed data available?