Development studios Backbone Entertainment and The Collective are merging to form the largest independent developer in North America, in a move designed to improve their ability to compete in next-gen development.
Speaking to the Wall Street Journal, Backbone CEO Jon Goldman confirmed that growing market pressures are the reason behind the merger.
"There's a lot of nervousness about the scale and scope of games increasing," he said. "It will physically become impossible to do great games with a small team with the next generation of games coming on."
The new company, which will operate under the name of Foundation 9 Entertainment, is promising to offer better development resources across a range of platforms, with more of a focus on securing intellectual properties.
Goldman, who is now CEO of Foundation 9, said that the decision to merge was not a difficult one. "We see great opportunities that can only be addressed by pooling talent and financial resources.
"We will be able to better invest in technology, processes and creative opportunities that will make us a key player in the future of game development and beyond," he said.
"We'll be rolling out our strategy through upcoming partnerships that will foster new media opportunities for our publishers and other existing relationships," added Foundation 9 co-president Douglas Hare.
"Our intention is to continue to focus on our existing opportunities and expand our current game development business substantially through our increased capabilities."
Backbone Entertainment was itself formed out of a merger between Digital Eclipse and ImaginEngine. Recent projects include Death Jr. for PSP and Charlie and the Chocolate Factory for GBA and PC.
The Collective is developing Episode III: Revenge of the Sith for Xbox and PS2 and Mark Ecko's Getting Up: Contents Under Pressure, to be published by Atari. There is no suggestion that the merger will affect release dates for any of the games currently in development.