It might seem odd to suggest that the games industry is struggling in light of recent sales reports that show healthy growth in both software and hardware revenue. But a recent report from media analysts Screen Digest seems to do just that, saying most game developers will have trouble turning a profit until 2008.

The analysis, as reported by the BBC, suggests that rising development costs, long production timelines and small, fragmented user bases for the newest generation of systems means sales often don't make up for production costs. The end result? "Sequels to popular games or those based on films are now the focus." Say it ain't so.

The article goes on to contrast Microsoft's strategy of buying up exclusives to Sony and Nintendo's focus on home-grown hits, but it doesn't really address how to solve the core problem of runaway budgets and overwrought game design. If developers can't streamline and simplify their design processes, the industry may be doomed to a hard-to-escape downward spiral of increased costs and increased reliance on proven brands and unoriginal ideas.

This article was originally published on Joystiq.