Record sales! Record layoffs!?

The latest NPD numbers for North America are out and guess what? Video Games have never been hotter or sold more. 2008 is still on pace to be a record year for the industry!

So why is it that every other day we are hearing about layoffs and how the studio closures. Why are they fighting to stay alive when the industry is doing better than ever? Why is everyone so glum?

A few thoughts:
1 - The Party's Over
Over the years Nintendo noticed that the number of people playing games in Japan was decreasing. Doesn't that seem weird to say? More people play games now than ever! ...but what are they playing? Nintendo say in Japan that people played in their adolescence, then stopped, and that the number of kids was not increasing. They saw a highway to nowhere and so they changed strategies assuming the US would follow course.
Interestingly, the US has followed course. Strip out the Nintendo numbers and the industry is down this year by a lot. Those core games like Fable 2, come out, make a big splash and then disappear. The problem is, they cost a LOT to make and they need to have legs. However, there just isn't an audience for them beyond the first 6-8 weeks at retail...and that's for the hits. Costs more to make taken with flat to declining sales = industry in jeopardy. It's not the whole reason, but it's part of the problem. Nintendo adjusted, the industry has been sometimes on the attack against Nintendo, and has become especially so as they start plummeting. It's easier to blame Nintendo for the problems than it is to look at the industry and realize that there just aren't enough gamers who like the old 'core' games to support making them at the current costs. (which btw makes for more than one obvious solution)

2 - The Party's just beginning
Nintendo has opened up the public to gaming like never before. It's an opportunity to experiment and try different things as you have tons of niches that can likely support a game. You don't have only the option of shooters and sequels anymore! If you want to make a game about lacrosse, now is the perfect time! How about a stock market game? Rodeo? Personality testing? It's an opportunity for innovation with a better chance of hitting the mark than in the past (notably it's still pretty low ;)

3 - 3RD Parties are desperate need of some business schooling.
Quick, name a single 3rd party title that was made by the 'A' team at EA, Activision, Take 2, Ubisoft or well, any game developer not called Nintendo? Boom Blox? That wasn't the 'A' team. It was a good game, but not the 'A' team.
So the current cycle is something like this:
Big games from the 'A' teams are coming out on the PS3 and X360
Big game loses money
Little game/shovelware comes out on the Wii
Little game/shovelware doesn't make money because...well it's horrible...
Publisher/Developer claims Wii is destroying the market
Repeat

Why not put the Bioshock or Dead Space or Mass Effect team on the Wii?
(I'm sure you have all kinds of protests in your mind...that's what happens at the big game developer's too, that is why the cycle just repeats over and over instead of being broken)

A final note... Rock Band on the Wii was the top selling version of Rock Band in November. Rock Band 1! Not Rock Band 2 that has been advertised and advertised over and over. You know why? Rock Band 2 doesn't come out on Wii until this week!?
Apparently either EA or Harmonix didn't get the memo that Guitar Hero sells best on Wii. Or they are just stuck in the cycle above? My guess is that they took soo long to release the horribly gimped Rock Band 1 on the Wii that they wanted to give it time to sell and didn't really care that customers were getting a piece of garbage. Apparently the brand value isn't very high and they wanted to horribly damage it? I'm really not sure, but I have to say it was the bone-headed business move of the year.
Instead of building brand on the Wii, what should be the lead platform for Rock Band, EA hurt branding and let Guitar Hero reign supreme. This is especially a bad move in light of the up-coming Beatles game. The Wii is the only console that can boast having an audience who listened to the Beatles in the 60s. So the Wii is #1 for music games and #1 for having an older audience. Do you think EA/Harmonix will bring the Beatles to the Wii first when it comes out? My guess is that the answer is 'no.' ...and the layoffs will continue...

A final, final note...
Can you name one publisher who is putting at least some of it's 'A' platform on the Wii (though perhaps not the 'A' team).
Square Enix...though it's really a long ways off, I expect it will pay huge dividends on the DS and then the Wii. Now if the FF team could get moved over, we might really have something. From one developer at least ;).