The perfect storm (for the end of graphics focus?)
Game Tycoon posts a good take on the current state of the high-end games biz, labelled "The End of the Eye Candy Arms Race".
I don't agree with all the specifics, but I agree with the end result, and would put it another way:
We are seeing a 'perfect storm' combination of (a) diminishing returns on investment in graphics, (b) increasing proximity to the edge of the 'uncanny valley', and (c) a Christensen effect on tech (e.g. someone can invest far less than you and come 90% as close with their graphics engine - related to (a) but different). This perfect storm is going to be (scratch that - is currently) the thing that finally pushes the industry over the edge to spending time & money on non-graphics problems.
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If you haven't noticed, the big 2 graphics guys are both extended their reach into mobo chipsets (NVidia at least), bus integration capabilities (SLI and whatever ATI is calling it), and low power chips... it took Intel decades to get to low power, but the cycle for graphics is/was much shorter - less than 5 years. I think they all realize that at some point, people are not going to shell out the +300% dollars to get something that can only be seen in benchmarks, and gains are less than 10%...
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