When I was at Codemasters I suggested that we formed a strategic alliance with an American publisher that was weak in Europe. Thus creating some nice synergies. This was discussed but never acted on due mainly to short termism. My idea was to then form a three way alliance with a Japanese publisher with possible eventual equity swops to create a global player in simple, easy stages.

We should see more consolidation this cycle as those who are not truly global find it more difficult to compete at the much higher level of development costs.

Though apparently easy to dismiss, I would not rule out the manufacturers as being “the sum of one publisher” because if you look at the economics of it, a manufacturer-publisher is far more profitable and efficient in the current industry than any third party. They make more out of their development and more out of their sales, and all three have deep pockets.

In that vein, I can easily see a scenario in 5 or so years’ time where there simply are no third parties at all. If the pressures on third parties continue to squeeze as they have done during this decade, it is entirely conceivable that all of the major third parties will themselves be purchased, including EA, by larger companies than themselves in key territories.

The easy split of that would be that the US publishers would come under Microsoft’s wing, while the Japanese ones would come under Sony’s, and Nintendo would keep themselves above the fray. In reality, it could just as easily be that Microsoft acquire Square, while Sony acquire Activision, but who can say.

Vertical integration and format consolidation is very much where the industry is pitching its tent because that’s where the power is. The eventual natural outcome of that is that all third parties get melted in the fullness of time to the great Cthulhu.