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DIGITAL EXTREMES LTD. Professors David Wood and Joseph Compeau wrote this case solely to provide material for class discussion. The authors do not intend to Mustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without it's written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, NGA 3K7, phone (519) 661-3208; fax (519) 661-3852, e-mall cases@way.uwo.ca. Copyright @ 2011, Richard Ivey School of Business Foundation Version: 2012-10-19 In early March 2005, Michael Schmalz, president of Digital Extremes in London, Ontario, had just received the latest industry data. The new Xbox 360 had considerably changed the dynamics of the industry, and Michael knew that Digital Extremes would have to add significant resources and fundamentally change its operations in order to focus on the growing console market rather than on PC gaming With only three months before game development would begin for the next new console, the