Around 10 per cent of Xbox 360s have been suffering from that irretrievable breakdown known as the “Red Ring of Death”, according to the warranty company SquareTrade, although the figure could be much higher.

The problem forced Microsoft to take a charge of more than $1bn for the cost of repairs in its last financial year, but the company refused to reveal what percentage of its consoles were suffering from the failure.

In a blog note, SquareTrade reports a 16.4 per cent failure rate for 360s based on 171 claims made on a sample group of 1040 Xbox warranties that it sold between April and July last year.

There were 102 Red Ring of Death hardware failures among these, with overheating thought to be the main cause.

SquareTrade notes its report only tracks its test group for six to 10 months and “once this same test group is tracked for 24 or 36 months, the fail rate is certain to go up.”

However, Microsoft extended its own warranty to three years for red-ring failures at the time of its writedown last year, so SquareTrade may not be seeing many of the breakdowns that are continuing to occur.

One interesting comment from this morning’s Electronic Arts conference call on its proposed take-out of Take-Two was on the subject of games for grown-ups.

“EA is notably underrepresented in M-rated [Mature audience] content, this gives us additional M-rated content, in fact it gives us the world’s best M-rated content,” said John Riccitiello, chief executive.

EA has focused on family fare, from its sports franchises to its Sims division and Harry Potter games, so one wonders whether it might water down and take some of the appeal away from Take-Two’s edgier titles.

In case you need reminding, Take-Two has appeared to actively court controversy at times to hype its games.

Manhunt 2, for example, was banned in Britain last year for its “unremitting bleakness and callousness of tone “. It was given an initial Adults Only [18+] rating in the US rather than a Mature [17+] one.

Bully ran into trouble in Florida in 2006 when an anti-video-game-violence attorney Jack Thompson applied for a court ban on the playground bullying game.

Before that, Grand Theft Auto: San Andreas was taken off store shelves in the US in 2005 after a hidden sex scene was discovered.

Mr Riccitiello seems keen to take EA in this new direction, if not to the same extremes.

At this month’s analyst day, he talked up the merits of Dead Space, an EA entry in the sci-fi horror genre being developed at its Redwood Shores headquarters and due for release later this year.

Before then, he could turn the struggle for Take-Two into an M-rated contest itself if its management continues to resist the so-far friendly overtures.

The Zeemote on first use seems to be a solution looking for a problem.

This separate joystick controller for playing games on mobile phones appeared an unnecessary peripheral to me – who wants to carry around something extra in their pocket just to play a few games on their phone, when the regular buttons on the handset work just as well?

I gave it to my nine-year-old son to play with and he concurred. There was nothing he could do with the joystick that he couldn’t do using the normal phone buttons. Even flying was just as easy on the phone.

However, I spoke to Beth Marcus, Zeemote’s chief executive, who provided a few reasons to justify the device, which will be demonstrated at next week’s Game Developers Conference.

Firstly, my son’s hands were a lot smaller than those in the Zeemote’s target demographic – 18 to 25 year-olds – where frustrations abound when a wrong key is pressed. Second, it’s a different decoupled sit-back experience compared to putting the phone in your face in Blackberry-prayer mode. Third, there are moves you can make with the Zeemote that can take you to the next level of a game, which are almost impossible on a regular handset keyboard - I’ll have to trust her on that one.

She expects the Zeemote, which features a thumbstick and four assignable buttons, to be available in the first half of the year for less than $50. It could also be bundled with games and/or a phone and calling plan.

The Zeemote could also find other uses as a remote control and a smoother browser of maps and web pages, but the focus is on games for now.

The chief executive created the first force-feedback joystick for PC games, but there are no rumble effects in the Zeemote, which pairs up with the phone as a Bluetooth device.

“That would have been an extra cost,” she said. “And there’s a motor in phones that can already add vibrations to games.”

Spore, the game that has been spawning cell-like in Will Wright’s imagination since 2000, was born as a fully-formed franchise idea.

At the Electronic Arts analyst day yesterday, the creator of The Sims showed off the eagerly awaited title and detailed numerous commercial spin-offs.

The Sims itself was not thought of as a franchise originally, he told us, with sales initially only expected to be in the hundreds of thousands.

But 98m units later, The Sims is not just a franchise but a whole division, one of four “labels” that now constitute EA.

Plans for this year include Simanimals, the expansion of MySims on the Nintendo Wii, a Sims movie, Simsonstage.com offering karaoke user contributions and SimsCarnival.com, a casual games site.

Mr Wright said Spore was conceived as a franchise from the start and deals have already been worked out with the likes of National Geographic, Comic Book Creator and Zazzle.

Spore is a game about evolution, with users creating creatures and moving on to shape entire planets. EA plans to release its Creature Creator software ahead of the game’s launch in September so that players can get a headstart on the life forms that will populate their individual worlds. Its Sporepedia will be a catalogue of parts and objects that can be acquired from both EA developers and user-creators – “pollinated content” that can populate other people’s universes.

Wright and his Maxis team, based in Emeryville in the Bay Area, seem to have caught the social networking bug as well. Players will have their own profile pages and can share movies of their worlds and inhabitants, with easy uploads to YouTube.

The demonstration made the personalisation available in The Sims look very Sim-plistic, while the creation tools seemed a major advance in ease-of-use compared to those of Second Life.

John Riccitiello did not mince his words about the performance of Electronic Arts over the past year.

“This outright pisses me off,” said the chief executive at EA’s analyst day today, referring to a graph showing a three percentage point loss in market share in 2007.

He said he was even more annoyed by the downward trend in the quality of EA games – the average rating per title supplied by Metacritic has fallen from 77 to 72 over the past five years.

The company also bet on the wrong horse in the next-generation console stakes – favouring development for the PlayStation 3 first, which proved problematic, over the Xbox 360 and lastly the Wii. Wrong call, he said, as was the overinvestment in its Renderware middleware that caused slippages.

And then there was the bloating of headcount by 3,000 in three years and development costs increasing to the extent that they were the equivalent of nearly a third of revenues.

Three major franchises also disappointed with sub-standard iterations causing slumps in sales for the Need for Speed racing game, NBA basketball and Harry Potter.

Of course, it’s easier for Mr Riccitiello as an incoming CEO – he succeeded Larry Probst a year ago – to admit the company has made mistakes and wipe the slate clean. But his candour was refreshing nevertheless.

His vision for the company was also invigorating. He has set goals of $6bn in revenues in 2011 and metacritic scores of 80. Outsourcing and offshoring will bring down costs and two campuses have already been closed.

He said he was unconcerned about the merger of Activision and Vivendi’s games unit to create the largest publisher later this year.

“It’s really a non-event,” he said, arguing it would not make EA any more aggressive.

“We’re already at max tilt, we have been changing a lot, we are our own worst critics.”

He told analysts he had given an earlier version of his presentation to 225 top EA executives last August.

“It was brutal,” he said.

Graphics chipmakers are fond of making a case these days that their graphics processing units (GPUs) are becoming as important or more so than the central processing units (CPUs) of the PC microprocessor makers.

As bigger displays in high-definition dazzle consumers, most of the horsepower that drives them comes from the GPU.

Fourth-quarter numbers for the graphics market will begin to leak out after the market closes today. Ashok Kumar, CRT Capital analyst, expects Silicon Valley’s Nvidia to pick up a point or two of market share, to the detriment of its rival, Advanced Micro Devices (incorporating the Canadian graphics chipmaker ATI).

He says 2007 was a memorable year for graphics, with the release of richer interfaces in the Windows Vista and Apple Leopard operating systems, a series of new graphics-intensive PC games, the new DX10 graphics standard from Microsoft and a complete refresh of Nvidia and AMD’s line-ups.

Nvidia released its next-generation graphics chips and cards ahead of AMD, gaining market share.

“AMD had their low point pretty much the middle of last year,” says Dean McCarron of Mercury Research, who releases the fourth-quarter figures today.

He says they recovered in the third quarter as new products were released and describes the latest versions launched over the past week as “process-shrinks essentially” that offer improved performance and have reduced costs.

The ATI Radeon HD 3450, 3650 and 3870X2 boards are based on chips with circuit widths of 55 billionths of a metre, compared to 80 billionths in the previous generation. This allows a smaller die size, greater transistor density and lower costs.

The 3450 and 3650, available this month, are low-power sub-$150 boards, while the 3870X2, announced today, features two GPUs and, at $450, is being priced around $150 below Nvidia’s competing card.

Multi-GPU boards are likely to become a trend, as are hybrid graphics.

The graphics capabilities of low-cost PCs can easily be upgraded by adding a new board. But, in the past, this has meant switching off the integrated graphics chip already included on the motherboard.

With hybrid graphics, the integrated chip stays on and is boosted by the addition of the board. AMD says it is introducing this feature with its new boards, Nvidia says it already has the capability.

The growing interest of traditional video game publishers in casual games looks like creating new hybrid formats and experimental business models.

Electronic Arts has announced its first completely free title, Battlefield Heroes, available for download this summer.

It looks like a dumbed-down cartoon-like version of its Battlefield 1942 PC game, but still seems far more sophisticated than a typical casual game such as Texas Hold ‘Em or Bejeweled.

There will also be elements of the MMORPG (massively multiplayer online role-playing game) genre, dominated by World of Warcraft. EA says players will be able to build their characters in an ever-expanding online world, paying a few dollars in micro-transactions for extra weapons and equipment. In-game advertising is also planned.

The success of Microsoft’s Xbox Live service has revealed there is money to be made from smaller-scale games, available for download there for less than $10.

EA is reinventing and repurposing an existing fading franchise. If it is successful, expect to see more of EA’s original IP appearing in a casualised form, aimed at less-than-hard-core gamers.

Touch-typing took on a new meaning for me this year as I struggled to hit the right letters with my fingers on the touch-sensitive iPhone.

What was more satisfying was the multi-touch capabilities the iPhone introduced – expanding the size of a photo by the spreading of fingers, stroking through a music collection in Cover Flow mode.

Touch has been a major trend of 2007, from the iPod touch and iPhone and their imitators to Microsoft’s coffee-table Surface PC.

Balda, a German company, was a major beneficiary of the iPhone’s popularity, with its glass screen, whose software can detect several fingers at once, being adopted by Apple.

Synaptics, a Silicon Valley company, has also got in on the act – its touch technology is now in more than 25 phones.

“In devices which give you the maximum visual information and where there’s no room for keyboards, the touch screen becomes your user interface,” Francis Lee, Synaptics chief executive, told me.

Synaptics is better known for its touch pads that replace a mouse in notebook PCs. I rarely click anything on my notebook these days, using “tap zones” on the touch pads to replace a mouse left- or right-click and stroking the pad to scroll through pages or zoom in or out.

Global revenues for touch-screen technologies will nearly double from 2006 to 2012, rising from $2.4bn to $4.4bn, according to the iSuppli research firm.

It lists eight leading technologies – resistive, surface capacitive, projected capacitive, infrared, surface acoustic wave, optical, bending wave and active digitizer – and eight emerging ones - photo sensor in pixel, polymer waveguide, distributed light, strain gauge, multi-touch, dual-force touch, laser-point activated touch and 3D touch.

Resistive products are currently the cheapest and most common types of touch screen and revenues should increase at a compound annual growth rate of 3.1 per cent to 2012, says iSuppli. In contrast, multi-touch revenues, helped by the iPhone and expected adoption by handheld game consoles and map browsing systems, are expected to grow at a rate of 31 per cent.

Imagine playing Halo 3 with a lot more at stake than losing a virtual life. What if, every time you were injured by an opponent, your bank account took a hit as well?

That’s the idea behind Kwari, a "first-person shooter skill-based cash-for-kills" online game, set to debut in the New Year.

Players of Kwari will suffer automatic deductions from their bank accounts when they are hit in a game, as well as deposits when they strike their opponents. The amounts can be anything from one cent to one dollar per hit depending on the stakes for the game.

There is also a fractional cost if they pick up additional weapons or health packs, with the money being pooled into a jackpot.

In 16 to 64 player match-ups, jackpots are shared between the gamer in possession of a smoking sphere called the Pill at the end of the game and the player who had held it the longest.

Kwari is the idea of Eddie Gill, a former games producer for Activision and Konami, and the company of around 20 employees is based in London.

It is a more sophisticated take on cash-for-gaming than winner-takes-all services such as Tournament.com, which went offline last month, and SkillGround.

"We have engineered the game around the exchange of cash from the ground up," says Clive Hibberd, chief executive.

He says the challenge has been to record the millions of mini-transactions in the game in a huge database and carry out double-entry book-keeping as money is transferred.

Kwari will be released in Europe first, due to uncertainty about how it will be viewed by the authorities in the US, where internet gambling is banned. Kwari argues it should be classified as a skill-based game as opposed to gambling, where luck is more involved.

Kwari will make money by selling ammunition to players. Mr Hibberd anticipates 5,000 bullets costing $5 and lasting a player for one or two hours.

Hard-core gamers are the target audience and 12,000 have signed up for a closed beta of the game.

"There’ll be weekly, monthly and annual jackpot prizes and we expect to have our first gamer millionaire by 2009," says Mr Hibberd.

Chess and Scrabulous are perhaps the most popular games being fought through Facebook profiles, but more sophisticated contests and environments are now beginning to appear on social networking sites.

At Bebo’s launch of its Open Application Platform last week, an executive from Gaia Online showed how users could step with their avatars into its virtual world from within Bebo to dance in a night club or chat with friends in many other virtual urban environments.

Now PlayFirst has partnered with widget supplier RockYou to distribute its Wedding Dash game on social networks.

“We’re looking to grab a new audience and extend our brand footprint into social networks,” says Heidi Perry, head of marketing, on the move.

Wedding Dash, a wedding planning contest, has evolved from the San Francisco casual game company’s Diner Dash franchise, which has recorded more than 200m downloads.

Diner Dash has also been benefiting from add-ons to its game, with more than 35 per cent of PlayFirst’s transactions coming from the sale of virtual goods. Players have been paying to dress their waiters, acquire new themed restaurants and accessorise them.

PlayFirst also announced $16.5m in third-round VC funding this week, led by DCM and including original investors Mayfield Fund, Trinity Ventures and Rustic Canyon Partners. PlayFirst raised $10m in its first two rounds.

DCM seems to have been attracted by PlayFirst’s expansion into virtual goods: “The company’s initial success with microtransactions this year has demonstrated that PlayFirst is among the smartest, savviest and most visionary companies in casual games,” said DCM partner Peter Moran.