Wedbush Morgan analyst Michael Pachter moderated this morning‘s session which included Don Daglow, president and CEO of Stormfront Studios, Arne Peters, segment manager consumer software and solutions with Intel, and Jon Goldman, CEO of Foundation 9 Entertainment.

The meat of the talk, titled "New Platforms, New opportunities - How to Ride Out 2006", seemed to reveal more about how publishers got tangled up in the difficulties of the console transition as opposed to how to get back on track. The panel pointed its collective finger at the lack of innovation in games.

Peters bluntly stated, "The industry is itself responsible for the mess caused by the transition to the next generation." He illustrated how innovations in gameplay simply aren‘t keeping up with innovations in hardware, saying, "A handful of games could be called next-generation, coming up. Why is that? Why is the industry holding back innovation on gaming side, but not on the hardware side?"

He stated that game makers need to start actually using processing power "before it‘s too late," adding that consumers "want to have new great games, not just faster games... We have all the tech to do it. Now we need to see innovation on the game side."

Goldman concurred that 2006 will be difficult throughout, and that "innovation is a giant challenge for the industry." On top of the innovation challenge, Goldman pointed out that the industry as a whole will need to focus on trends in gamer demographics; the gaming base is made up of older gamers that want specific types of titles, and younger gamers who want something different than what many kids wanted in the past. Compounded with tech trends, the industry has its work cut out for the coming year.

Daglow voiced his opinion on how mounting consumer expectations from games have driven development budgets to ＄15-＄20 million for high-end games. He said that developers are continuously trying to justify consumers‘ purchases by building bigger games with high production values because, essentially, gamers don‘t intend to use their imaginations as much as during the NES days.

As far as the state of the industry, Daglow said, "It will be 2007 before things start to get better."