It was around three years since the Sony Playstation 2 had hit shelves, and while the price had just dropped under $200, I was having trouble selling the system to a customer due to a very unusual objection.

“Why should I buy the PS2?” he asked. “Isn’t the PS3 going to be out in a year or two?”

The statement was absolutely ludicrous — at the time, the Playstation 3 was a distant rumor, something we all assumed Sony would be releasing one day, but which no one knew anything about. I convinced the man that it would be years before he’d be worrying about a PS3 — and I was right! — but his attitude was a precursor of the way the videogame industry was shifting. The Nintendo DS, the Sony PSP, the Xbox 360, the Nintendo Wii and the Sony Playstation 3 all arrived on shelves between 2005 and 2006, and the video game industry shifted into its biggest “next-gen” generation yet. As I write this article, the Nintendo DS has become the bestselling handheld system of all time, and the Xbox 360 has dropped its price to $200. The Nintendo Wii is still difficult to obtain, and the Sony PS3 is trailing the industry with 17 million systems sold. All of this can only mean one thing — in another year or two, we’ll be hearing about the next round of next-gen video game hardware.

As it stands, home video game consoles are in their sixth or seventh generation (depending upon whom you ask). And while each console generation has offered bigger and better things than the last, every generation has followed a fairly predictable life cycle:

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The video game industry can be a fairly predictable place. For example, if a big title (often referred to as a “AAA” release) is announced for release later in the year, you can almost bet it will ship in October, November or December. If new hardware is launched, you can bet that at least 50% of the titles available for it on day one will be sloppy ports of existing games. And if a blockbuster action or children’s film debuts, it’s almost a certainty that there will be a slew of tie-in games available for almost every system out there.

Licensing is big business in the world of video gaming, especially around the holidays. And there’s a pretty good reason for it: the majority of gamers (or people purchasing for gamers) are what the industry refers to as “casual gamers,” and they’re more likely to buy something that sounds familiar than they are to try something new. It’s very difficult to build up a AAA intellectual property in the gaming industry, and though series like Halo, The Legend of Zelda, Grand Theft Auto and Final Fantasy have managed to pull it off consistently, the majority of games struggle to keep themselves on the retail radar at all. Licenses help drive retailer orders, and having a movie tie-in title available a month before the film debuts can really help improve sales.

What’s peculiar about the success of licensed video games is that they’re almost always bad. Every now and then, a good licensed game, like The Chronicles of Riddick: Escape From Butcher Bay or Star Wars: Knights of the Old Republic hits shelves and demonstrates the power of licensing. But more often than not, licensed games are awful. For example, this summer’s Iron Man games were consistently a poor crop of games, regardless of platform. The same could be said for the Wall-E tie-in games and the Hellboy game. And yet most of these games likely moved more copies than many good games that didn’t have a license behind them.

The comic book industry, on the other hand, has a fairly dismal record when it comes to taking licenses and turning them into profit. Certainly, there have been a few success stories; Dreamwave did well in the early part of the decade with Transformers, and Marvel certainly earned some attention for Stephen King’s The Dark Tower and a project I’m all-too familiar with, Anita Blake: Vampire Hunter. But for the most part, the industry has done a terrible job with licensing, both from a production and a marketing point of view. And thus it’s worth a few moments to consider why licensed products are so lucrative for the video game industry despite their low quality, while licensed products are only somewhat lucrative in the comic book industry despite the seeming demand for them.

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Video games and I have a long history together — my first professional writing gig was as a video game reviewer, and I eventually became the editor of a semi-popular game review site (now defunct) called eXscape. Later on, I worked with the Future Games Network and PCGameworld.com. And then, a few years later, I was the store manager for the #1 EB Games store in the Midwest for 2004 and 2005… and #2 for 2006 (out of hundreds of stores!).

It was video games, as well as my part-time gig in comics, that got me interested in business in the first place, and I still daily follow the industry to see what’s going on. There are many interesting parallels between the video game industry and the comic book industry, and there are many things that one can learn from the other.

So, I’ve decided to write a series of articles this week discussing some of the lessons I’ve learned from watching the video game industry… and how these lessons might apply to small publishers and, in particular, comic book publishers. And today’s article is going to focus on one of my favorite genres of video games, one that has actually seen some spinoff licensing in the comic book industry: fighting games.

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I’m not a big fan of fanfiction, as I’ve said before, for one simple reason: it’s lazy. And yet the Internet has given rise to huge fanfic communities that allow fans of everything from Full House to Harry Potter to craft their own continuing adventures of favorite characters… and to get their work in front of eager audiences. Never mind that a large amount of fanfiction is just plain awful; it’s familiar, it’s fan-friendly, and it’s a fun little guilty pleasure for those who want their favorite stories to keep on going.

In the United States, fanfiction is technically illegal, but generally allowed as long as there’s no money changing hands and no claims to copyright.

Elsewhere in the world, however, fanfiction is so common that it’s often actually published and sold. In Japan, for example, amateur fans often get together to produce “dojinshi” books that are essentially fanfiction comics featuring popular characters in continuing adventures or alternate realities. One would expect this sort of thing in neighboring Asian nations that have less restrictive copyright laws (piracy and knockoffs often go hand in hand!), and not in a large consumer nation where intellectual property is big business.

But the Japanese have a very different attitude towards derivative works than people in the United States. The Japanese copyright laws are extremely rigid, but there is something of a gray area where fanfiction is concerned, since fanfiction is seen as something that helps to increase sales of official merchandise rather than take money away from the copyright holder. As long as the copyright holder doesn’t enforce the copyright, the creation and sale of fanfiction is assumed to be permitted. “Dojinshi” communities are even celebrated in certain circles, since they’ve essentially given birth to popular studios such as CLAMP and Gainax. (You can read an interesting interview with a Gainax member here that discusses this further.)

What’s impressive about a lot of the Japanese fanfiction is that it’s created by amateurs, but printed in small professional quality runs and sold in markets. Much of it is of a fairly low quality, but some of it is indistinguishable from the official products. Some of it is even arguably better. And that poses a new problem in the digital era, because while in the old days, one had to buy a physical copy of a fanfic in order to enjoy it (thus keeping the number of eyeballs seeing it rather low), the Internet allows even the crummiest fanfiction story to be viewed by millions of people from around the world.

And that leads me to wonder… now that the Internet has given fanfiction an ability to grow around all of the thorny legal issues surrounding it, is it possible we’ll see a brand new style of “do-it-yourself publishing” in the near future? It could happen sooner than you might think… and it could have major implications for the rest of the world of publishing.

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