With Game Group struggling to keep its head above water and the arrival of even more powerful mobile gaming in the for of the PS Vita and new iPad, the traditional games industry has been caught napping.
At the video game BAFTAs which took place in London over the weekend, the International Business Times UK spoke with Philip Oliver, co-founder of Blitz Game Studios, who believes that console makers are under pressure from iOS and Android.
"The industry is in absolute turmoil," Oliver told us on the BAFTA red carpet. "We've always said that the amount of power in these devices [PS Vita, iPad etc] and a number of devices that have been brought to market is fantastic, and of course as you've gone away from boxed products and traditional distribution so costs of distributing games drops right down."
"What has this led to? It's led to things like being able to buy cracking games on the iPad (read our review here) and the iPhone and stuff like that, which puts the traditional games market - Nintendo, Sony and Microsoft - under real pressure."
Sony launched the PS Vita to a lukewarm reception last month, and while we found the hardware to be excellent, the price and limited range of games is disappointing. Read our full review of the Vita here.
Oliver continued: "Obviously the Vita is going to be the first to really feel that pressure head-on. I think the Vita is an awesome machine, don't get me wrong, but the business model is challenged badly by the iPhone, the iPad, tablets, Android. It's a challenge."
So far the portable games sector on iOS and Android is mainly limited to casual games, leaving hard core titles like Portal and Battlefield to be developed for console like the Xbox 360 and PS3.
Oliver said that hardcore game developers must adjust and move away from the boxed product: "If they can get a good business model reliant on digitally distributed games rather than relying on boxed games, because those will always be very expensive because there's so many people in the chain."
With news on Friday evening that a rescue package for Game Group has fallen through and that the group will face imminent administration, we asked Oliver where he thinks the retail company has gone wrong.
"I find this very interesting. I was actually talking to my wife about this and she said 'oh well, it's because we're all going digital,' and that kind of makes sense. You kind of expect the market to drop a little bit. And then she was saying 'but they [Game] do all the trade-ins', but that's not going to help."
"Well, it actually helps Game a bit, but it doesn't help the industry. And that's actually what's happened, they've fallen out of love with the people who really keep them in business, those who produce the new games, the publishers and the hardware manufacturers. So when the going got tough, they didn't have any friends. And I guess that's the biggest problem."
Oliver compared Game to GameStop in the US, a very similar business which is going from strength to strength - and is even tipped to be interested in buying Game Group.
"The interesting thing is, although digital is going to take over, it's going to be a slow and gradual thing, and in fact in America GameStop has a very, very similar business model, but actually it's really successful. But that's because they have friends, they've kept friendly with the industry and so it hasn't just fallen off a cliff - instead its still trading, it's still profitable and it'll still be here for many more years, I'm sure. Game, on the other hand, it's days are probably numbered."