A report from Screen Digest into the brutally competitive games industry has forecasted that most games developers will not see any profits on titles until at least 2008.

Rising development costs and small user bases will insure that only a small proportion of console games for single or multi-platform release will achieve profitability in the short term. This is leading major games publishers to revise their own strategies, mainly through risk reduction strategies. These include outsourcing, releasing games on as many platforms as possible, making sequels to popular titles and basing games around popular movies.

According to the report, “Next Generation Consoles: Games publishing, hardware analysis and forecasts to 2010”, Sony's strategy has been to make more of its own games. It has doubled the size of its internal development resource since the launch of PS2. Only Ubisoft and Electronics Arts are bigger.

Microsoft, on the other hand, has aggressively built exclusive relationships with top games developers to make titles only for the Xbox 360. This is proving to be a success, said Screen Digest, with top selling game, Gears Of War [pictured], raking in the cash.

According to report author, Ed Barton:

"While the previous generation was quickly dominated by Sony's PlayStation 2 across all major territories, this time we anticipate a more competitive situation where market share is likely to be split on a territorial basis. Xbox 360 has a 12 month advantage, but whilst it has built a strong position in the US, it hasn't been able to achieve the traction needed in Japan, and Southern Europe remains a challenge."

Most interestingly though is the assertion that Sony, thanks to massive games investment and the PS3 having a Blu-ray drive for playing high-def movies, will have the largest community by 2010.

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