Ron Carmel of 2D Boy, developer of popular indie game World of Goo, believes that Xbox Live Arcade's health is "flagging." Do the industry analysts agree?

World of Goo for iPad pulled in over $50,000 per day at its peak -- and still makes its developer about $2,000 a day even now.

Writing on his company blog, Ron Carmel of World of Goo developer 2D Boy argues that Xbox Live Arcade's health is flagging. His basis for this is an "indie census" which he sent out to around 200 developers in August of last year, and a followup survey sent to the same group this year. An important question in Carmel's research was which platforms they had previously developed for, were currently developing for at the time of their responses, and which they were planning to work on in the following year.

The number of developers working on PS3 titles -- or planning to in the future -- has increased steadily since 2008, while the number working on (or planning to work on) 360 titles peaked in August 2010 before starting to trail off. In 2008-2009, Microsoft had more developers working on XBLA than Sony had for PSN. This year, the situation has reversed, and the gap will seemingly continue to widen next year.

Analysis of the makeup of his sample showed Carmel that the developers who responded to his survey represented XBLA's "star talent," as 3 of the top 5 XBLA games had been made by developers from the group, and 76% of the games made by these teams had received a Metascore of 75 or higher, with an average of 78 compared to 66 for all other XBLA titles. It's therefore unlikely, he argues, that the decline in XBLA production is due to Microsoft turning these developers down on grounds of quality -- rather, they are simply choosing not to work on Microsoft's platform.

But why? Growth in development on Windows, Mac, iOS and browser games is a big part of the reason -- many are jumping ship to alternative platforms that are growing in popularity and profitability. The biggest reason, according to Carmel, however, is the ease of working with the platform owner. 69% of developers rated the difficulty of the publishing process as "very important" in determining which platforms to develop for. And -- you can probably see where this is going -- 48% of developers ranked publishing on XBLA as "excruciating," and 36% as "difficult." No developers rated Microsoft's platform as "very easy" to publish for, compared to 64% for Steam, 57% for Facebook and 54% for Apple's iOS and Mac App Stores.

Then there's the revenue question too -- Carmel notes that top XBLA and PSN hits earn developers millions of dollars, but App Store hits earn tens of millions, even with their significantly lower initial prices. He uses the example of his own World of Goo, released on iPad back in May, which briefly enjoyed a stint on the number 1 spot for top grossing iPad apps and was bringing in upwards of $50,000 per day. Currently, it is sitting between #225 and #250 on the top grossing charts and still pulling in about $2,000 per day.

Carmel argues that XBLA needs to do several things to improve XBLA and reverse its downward trend: create a fair contract that doesn't require negotiation; improve Dashboard navigation to make it clearer to inexperienced users what XBLA and XBLIG are and how to download titles from them; stop demanding exclusivity; open up the currently restrictive development and publishing process; allow every console to act as a dev kit; automate the publishing process; drop the ESRB in favor of a self-administered rating system; and ditch the requirement for developers to make toys for Xbox Avatars -- or at least provide financial or promotional incentives for them to do so.

Analysts argue that while XBLA is starting to see fragmentation among developers, we haven't had a downloadable title enjoy the success levels of games like Braid yet this year.

Analysts are more cautious about Carmel's assessment of the situation, however, Eurogamer reports.

Billy Pidgeon of M2 Research argues that Carmel's research, while sound and backed up with data, only proves that XBLA has peaked "for a specific group of independent developers who are responsible for high quality games that outsell the average XBLA game."

"Sony is acquiring more unique content for PSN," he says, "and in many cases it's exclusive content, which will cost Sony more but will clearly differentiate their online games store from XBLA and other competition." In other words, rather than the same titles showing up on both platforms, as frequently happens now, we'll start to see some divisions, with each platform becoming more specialized.

"In terms of digital games delivered through a home console, Microsoft will continue to be the market leaders," added Jesse Divnich of EEDAR. "I am not disagreeing with Mr. Carmel. I believe some of his points are valid and any digital service provider has its own restrictions and hurdles. Not every game is the right fit for every service. We are certainly seeing some fracturing among developers, and Xbox Live and PSN are no longer the only option for game distribution."

Wedbush Morgan's Michael Pachter, however, argues that "as the 360 price comes down and the installed base continues to grow, there should be a significantly larger addressable market for XBLA games." He also added that "if anything, there are more titles than ever, but we haven't had a Braid or Limbo so far this year" -- referring to those rare indie titles that enjoy runaway success, mainstream popularity and critical acclaim rather than suggesting we need sequels to those games. Should a title on the scale of either of these titles show up on XBLA and prove both popular and profitable, Microsoft's platform may suddenly seem like a more attractive option once again.

Pidgeon also argues that the oft-forgotten Xbox Live Indie Games marketplace is a "waste of a good opportunity," saying that "what should be a showcase for indie games is more like a swap meet."

"It's worthwhile to let anybody make a game with XNA," he says, referring to Microsoft's provision of Xbox 360 development tools through the XNA Creators Club and agreeing with Carmel's point that the Xbox should be more open as a development platform, "but there should be a 'top shelf' for the best independent games. Indie games are like indie songs: most of them suck, but the ones that don't are unique and deserve to be bought, played, talked about, discovered and awarded."

Nicholas Lovell of Gamesbrief, meanwhile, believes that Microsoft is trying to "recreate the limitations of the physical distribution market rather than embracing the opportunities created by the digital market." He argues that "the sooner the world becomes more open, the better."