• GigaOm, Monday, June 4, 2007 11 AM

The video game industry is losing the attention war. The funny thing is, interactive entertainment is as popular as ever, but video games--as in the major consoles and their game publishers--are now a sliver in a much larger interactive pie. The industry is "on the road to irrelevance."

Just look at the problems: Electronics Arts, the industry's biggest publisher, threw out its CEO, cut back its sales forecast, then admitted to picking the wrong winner in failing to develop enough titles for the Nintendo Wii. To that point, so did everyone else, as indicated by the resulting crisis at Sony over the PlayStation 3. But the projected video game pie is much smaller than it used to be: The Wii is battling Microsoft's Xbox 360 in what "is actually a duel between midgets." With each selling in the low millions, it appears that neither stands a chance of reaching the massive user base of the PS2.

In fact, it looks like hardcore console gaming has become a niche in an expanding gaming market, underscored by the rise of massively multiplayer online games like Second and Gaia Online. The former has a big relation to the video game industry, yet none of the major MMO titles are produced by the industry's giants. Casual gaming, which attracts a significant number of female users, bears little resemblance to hardcore video gaming, but it caters to a much larger audience--which is what Nintendo is trying to do with the Wii. And surprise, surprise, Nintendo's is the only strategy that seems to be working

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