Richard Garriott, in a recent interview with IndustryGamers, offered both praise and a note of caution for Blizzard, the gaming giant behind World of Warcraft and the upcoming Diablo 3 (among many, many other well-known titles).

Blizzard will “always be one of the best” developers, but the company will be facing new challenges from the “Zyngas of the world,” industry veteran Richard Garriott tells us. Garriott considers himself and his company Portalarium to fit within that category. When IndustryGamers asked him if that means he’s a new challenger to Blizzard, he responded, “I hope that’s exactly right.”

While Portalarium has worked on casual casino style games, Garriott assures us that one of his upcoming projects will be right for the core gaming audience, and will provide an experience “much more like Ultima Online than people might expect.”

How could a free-to-play social title be a threat to Blizzard? It’s not… not yet, anyway. “Right now, where those worlds seem very distinct, and very separate, and very noncompetitive, they’re targeting completely different users – I think within a few years, you’ll see that’s not really the case. I think you’ll see that the quality level that comes up through the casual games will rival the quality of traditional massively multiplayer games and then, because it’s not something you have to subscribe to, because it’s something that virally spreads, and especially because, as people churn out of a big MMO they’ve got to go somewhere. And if you’re a company that does only one big MMO, odds are they’re churning out for somebody else,” Garriott asserted.

According to Garriott, the industry is going through a major upheaval now, similar to how single player RPGs evolved and companies formed to populate the MMORPG space. The same thing is happening in casual and social, as traditional companies like Blizzard failed to step in.

Here’s the money quote, though:

“The only reason Zynga exists is because people like EA, people like Blizzard, failed to step in. And so each of these major upheavals allows new, major corporations to come in and fill that space, which I think is to the great detriment, and then leaves the big companies of the previous iteration actually trying to catch up. And so I think that the challenge for Blizzard, when you are that good, when you’re making that much money, when you’re that much on top of your game, in the current era, it’s actually fairly difficult to spend money towards things that seem to not be as profitable, that people don’t understand as well and that you don’t imagine could possibly beat how well you’re doing at the top of your game in the current era. And so that I think is a risk for anyone, including Blizzard, that they will elect not to tackle that one, because they don’t see that it’s important and relevant.”

I’ve — we’ve — talked about social and mobile games a lot on the site here over the last few months, in no small part because of Lord British’s own efforts in those spaces, and because of various rumours coming out of BioWare Mythic which pertain to a hitherto unknown Ultima project. The spaces — mobile and social — are in many ways distinct, and yet are also in many ways similar and even overlapping. And it is these spaces in which much of the coming innovation in gaming (and much of the coming competition, as well) will take place.

It is in these spaces that gaming companies stand to make enormous profits, if they can step in with a competitive product that catches the attention of a wide audience.

The Ultima creator correctly notes that EA was late to the social and mobile parties…although they’ve done rather well for themselves since entering both spaces, and have produced several excellent games in both spaces. They’ve had a few duds as well, especially on the social side of things, which is one of the reasons why Zynga continues to dominate the social scene. But in general, they’re doing very well, and many of their games in both spaces are quite highly regarded and very popular. EA’s quarterly profit statements continuously show good returns on the mobile and social side of the business.

Blizzard — and their parent/partner company, Activision — have opted for a different (and, in Garriott’s opinion, wrong-headed) strategy, and have thus far stayed out of the mobile and social spaces. Granted, they’re sitting on a license to print money by the name of World of Warcraft, which probably diminishes the need they feel to branch out into the casual gaming market. In the short term, at least, this is a not-unreasonable strategy. But WoW would appear to have finally begun its decline (although they’re still seeing big profits coming in, for now at least). Jumping aboard the social and mobile bandwagons would be one option for Blizzard to create a new product that ensures that the company has a constant revenue stream as WoW continues to shrink…which will, at some point, cut in to their currently-impressive bottom line.

But Blizzard (and Activision) don’t seem to have the foresight necessary to see that path forward. That, or they’re secretly clairvoyant and have seen the coming collapse of the casual gaming scene. But somehow, I doubt that.