Britain's leading game developer has called on the UK Government to help struggling games firms.
Peter Molyneux, Managing Director of Lionhead Studios, said making a successful video game has become too expensive for the smaller, independent developers.
"It is well known that Britain leads the world in development terms," he told BBC News Online. "There's no other place on Earth that has the concentration of development talent."
He said it was essential that the government stepped in with financial aid to help save the country's gaming talent, similar to the way it funds British film-makers.
Mr Molyneux bleak assessment is at odds with the apparent healthy state of the industry.
Last year was a boom year, with combined UK sales of games titles and consoles of more than £2bn.
But over the same period, several small British game studios such as Red Lemon, Crawfish and Runecraft went bust or into receivership.
The problem for the smaller businesses is the escalating cost of creating a good game. Ten years ago, the average game cost £200,000, whereas now the average budget is £1m.
"Making a computer game now is incredibly expensive," said Mr Molyneux. "You're talking about millions and millions of pounds to make a triple-A, globally successful game."
"A few developers are really, really struggling."
To weather the storm, the games industry has followed in the footsteps of Hollywood.
The industry is going through a wave of consolidation, with developers banding together to achieve a critical mass to survive.
It also means that instead of just working on one title and hoping for the best, they can run several projects in parallel, relying on the hits to pay for the flops.
Mr Molyneux fears that the commercial pressure could harm Britain's reputation as a leading developer of games.
"The small independents are the creators of all the new, fresh and different ideas and that is definitely going to suffer," he said.
"You are going to see less of the creative, out-there ideas which turn into the compulsive properties later on."
"With a little bit of help from government, you could see those developers growing and becoming a significant revenue source."
Wait and see
This would be similar to the way British films are supported by the Film Council.
It was established by the government in 2000 and has a total annual budget of £20m.
But Mr Molyneux is realistic about the chances of any kind of financial assistance for the games industry.
Asked whether he believes this will be forthcoming, he hesitated before answering.
"Let's put it this way, I'm not holding my breath."
His solution has been to create a network of games development companies.
These benefit from Lionhead's resources and technology, as well as from his reputation as a games guru.
Despite the difficulties, Mr Molyneux believes the industry can weather the current troubles.
"We have been in this position before. In the mid-90s we had this consolidation phase where there were fewer independent developers.
"We're seeing that phase over again. As we go forward there will be fewer and fewer studios but there'll be smaller studios springing up again, maybe doing something different."
You can hear more from Peter Molyneux on the BBC World Service programme Go Digital.