By Marc Cieslak
Reporter, BBC Click
Spiralling production costs, development time and accusations of a lack of innovation are causing problems for gaming companies. But some in the industry are hoping the revival of user-generated games may provide the solution.
Boasting 3D, photo-real graphics and 5.1 surround sound, contemporary video games are pretty impressive.
Developing a game that becomes a hit can be a risky business
But games that look and feel next-gen do not come cheap.
With development costs running into tens of millions of dollars, the games industry relies on sequels and tried and tested formats.
Eidos' Ian Livingstone says: "The industry really is relatively young but already it's surpassed Hollywood box office in receipts. It's [earned] $20bn [£11bn] a year in software sales alone, so it's a huge business.
Popular game genres like sports, racing and first person shooters, dominate the charts
"I think publishers became a little bit more risk-aware because of the amounts of money involved.
"You get two or three titles wrong, and you've spent £5m [$9m] to £10m [$19m] each on them, you're out of business in a hurry."
Popular game genres like sports, racing and first person shooters, dominate the charts.
But where are the new, innovative ideas?
Observers think the industry needs an injection of imagination.
Back in the 1980s it was a different story.
Designers like Peter Molyneux programmed blockbusting games from their bedrooms.
Mr Molyneux went on to create the hit games Populous, Black and White, and The Movies.
Peter Molyneux from Lionhead Studios says: "I was lucky. I could start with a friend and we just worked on this crazy idea called Populous and that's where we came from.
"Those days, unfortunately, have gone.
"What we created was amateurish to be honest with you, if you compare it to today. What we are dealing with today are not only fantastic game designs, but amazing quality visuals.
"We are actually having faces with real muscles on screen, which we can motion capture. We are dealing with real Hollywood actors, real scripts and real stories.
"It's not two people now, it's 150 people that make a game."
One answer to the lack of imagination in the industry is to bring in new blood bursting with fresh ideas.
Free software tools are encouraging people to design their own games
So how do aspiring developers on a shoestring get a foot in the games industry's door?
Microsoft thinks it has solved the problem: user-generated games.
XNA Game Studio Express is available free to download for Windows XP, and for Vista when it finally launches.
It is a set of game development tools for the Xbox 360, aimed at hobbyists and students.
Microsoft has teamed up with 10 universities in the US who will be adding it to their curricula. Developers will then be able to share their efforts via Xbox Live for an annual $99 (£53) subscription.
But are these tools enough to satisfy budding developers serious about a career in games?
University of East London's David Dorrington says: "I've had a look at the beta version of it and I think that the idea is interesting.
"I'm glad that software's being made available for people who make games and intend to trial them on a next generation console.
"However, I'm not really convinced that it's a huge shift from where we are already.
"It's possible to download a software development kit and make DirectX based games, it's possible to make Flash games and share them with communities using Macromedia or Adobe software. They are not offering really new."
Student Tyrell James says: "The XNA concept is a very good way of getting new creative games out on the market, unfortunately the way it's laid out is a little bit too stifling.
"It could be very good for the homebrew crowd, and for indie developers, but because of the scope that's allowed it could be quite stifling.
"Most of the software is only going to be available through downloading for Xbox Live or through Windows Vista, so we are expecting maybe 50MB software packages, and to make a grand scale game like some people do, like an RPG or an FPS [first-person shooter] of massive proportions you're just not going to have the space to do that."
The concept behind XNA is nothing new. Sony created development tools for hobbyists in 1997 with Net Yaroze for the PlayStation One.
And of course smash hit shooter Counterstrike grew out of the homemade PC games scene.
But as games get more complicated, requiring larger teams, how does the aspiring designer build a blockbuster with this software?
Peter Molyneux says: "I'm hopeful that you're going to see some great designs coming out of the bedroom.
"It's 100% down to the passion that people have, and the ability to perhaps bring in other people, maybe from all around the world on the internet, and create something."
Student Keelia Hess says: "It could work. They are doing it now in all sorts of companies.
"You could have a call station in India, and graphics in Singapore, or you have your programming team in the states."
It is still early days for Microsoft, but if it succeeds in creating a community of bedroom console developers, can you imagine what the next generation of games could be like?