That is a very good point, this is something the game industry does a lot, especially around fall. September and October are usually crazy months for new releases and some of the behemoths inevitably swallows up the "lesser" ones that might be just as good quality wise, they only have smaller budgets. What was MW2's ads budget again? 200 million? Nothing can compete with that. There's also the issue of roots, some companies simply don't have the arm reach (or, alternately, the funds) to properly advertise and move their games and that's why gems like King's Bounty: The Legend get largely overlooked in favor of games that are (imo) inferior but has a bigger media machine supporting it.

It is a shame that some rotten apples spoil the entire basket, this is a huge weakness where daughter companies in any industry are concerned. In a decade or so, I can see two or three major conglomerates owning practically every studio and publisher, with only every odd Indie developer being independent. Hardly a good thing for us consumers but it seems almost written in stone from where I'm sitting.

How did you get this?

Except.... 10-20 million keeps getting quoted this generation as an AVERAGE.

Yeah i hope dev costs lower.

While the VG industry is bigger, the industry can draw parallels with the RPG industry(Pen and Paper that is). It's pretty much hit a stagnation point where Indies try to create new games, but it's all targeted to the enthuast market. Oddly only Dragon Age(PnP) is attempting to be user friendly. It's sad, but hey this is where is seems that many core gamers want to go.

I think developers of a lot of big games and Microsoft initially realised that the game industry needed to move into a more 'Movie/TV industry position where they can have multiple avenues to gather revenue and this is where downloadable content comes in. If you can get $5-10 extra on average from your customers for the downloads of maps and extra content which is cheap and fits in with your development of the next game it makes perfect sense and it definately helps make the bigger projects even more profitable to offset the next game in development or other games which they aren't so lucky with. Movies have ticket sales, DVD sales, rentals, and tv broadcast. Games now have retail sales, DLC, games on demand (for cheap titles the cost of game + distribution/retail margins are higher relative to sale price) and hopefully in the future game rentals. 

But as always good content prevails and companies like Valve, Epic, Bethesda are simply rolling in the cash because they simply make games which are standout in the quality and the sales follow through from that.

Was a time too when making $100 million at the box office meant massive success and huge profits for the movie studio/producers. Now-a-days with movies often having a production budget over $100 million they need to make at least $200 million at the box office to break even. Of course movies have DVD/blu-ray sales to help profits.

It's called inflation.

DLC can help, but it's also where sequels come in. Money may be lost on the first game because of the huge resource that is required to build a game from scratch. But the sequel will borrow a lot from the first game (and improve on it too) development-wise and make it easier for the sequel to make the overall franchise profitable. If you can squeeze a 3rd million selling game into a generation then the profits will really start to roll in for the developer and producer.

Also, like Crytek, licencing the development kit helps. Crytek makes money without having to make an acutal game, the developer's production costs are less because they don't need to make a game engine from scratch.

There's no getting away from the huge profitability of a well loved franchise with relatively low production costs. I bet NSMB Wii became profitable after its first 250K games were sold. Now that's success. I bet MW2 also became profitable within hours of it being released, probably needing less than 1 million sales to get past break even.

There's a place for good quality, low budget games (just like good quality low budget movies), but there's also a place for good quality big budget games. There are PSN/XBL/Wiiware games that sell for less than $10 which will turn a profit, and they are fun and provide good value for money. But I also want the Uncharted 2s, and Final Fantasys, and Mass Effects, and , and.

MW2 may have been profitable after the first day of release but it took a lot more sales than 1 million.  They had a 150 million dollar marketing budget for that game not even including development. 

Well there are alternatives, many small companies have stuck to handhelds, made great gems and even started their own publishing businesses.  Building up from there you can go onto Wii publishing and such, the budgets won't have to be huge to compete with other companies and as long as they at least advertise some they're giving a lot more effort than most publishers on Wii as far as getting the name out there.  I feel that the industry as a whole needs to find a new median where the standard shouldn't be based off graphics, hype, and big budgets, but you can make a simple good looking PS3 or 360 game (even in 2D) and it wouldn't cost nearly as much, the issue comes in where the way to differentiate yourself would be to have good gameplay and overall design, and honestly I don't know how many recent games you've played but man, 6 hour long singleplayer games that just rip off other big titles that are already generic as can be, will not cut it and I dunno if many teams have the talent.

The other issue is the big publishers themselves, they don't want to green light anything they deem as a risk, and that means anything out of the norm, but for the industry to change for the better they're going to have to and I honestly don't see it happening very soon.  These big guys are gonna have to get kicked really hard in the nuts to realize things need to change.

The 10-20 million figure is for higher budget titles and for titles using new engine's, many titles however are built using the same engine for well under that cost (an example is that all of Insomnaic's games have used the 1 core engine with a few modifcations made for ratchet/resistance).

 Also we don't know how the 10-20 million figure is calulated, is it development only? does it include marketing costs? How much do publishers get per game sold $15? $20?, are big buget titles like GTA4($100 million for dev+marketing) / MW2($200million? dev+marketing) included? are budget titles made for under $1-$5 million included?