Of all the traditional "book" style publishers out there, it figures Random House would be one of the first to make this leap. Historically they have been dabbling in this type of cross-media, finding ways to leverage their edutainment materials and other properties into games and online media.

This kind of scares me. I would hate not to be able to craft my game's story. Then again, if these people can come up with something that universally knocks socks off, you'd probably be excited to build your game around it. But... for designers who are concerned with the story... the message of their game... this is like a group telling a painter what he should paint about and what it should mean, and then leaving him to fill in the canvas.

Bo, I believe you have the wrong idea about how this partnership is working. Brad Wardell had written several manuscripts over the years and they are the basis for the story of the game Elemental. The partnership allows him to get help making those manuscripts into a published as well as outsourcing a little of the story writing for the game.
This may be a more economical way to go than keeping a staff of writers, especially for a smaller development team like elemental has.

I forgot to mention that the way Brad's posts about it really seem to hint that random house is helping with the quality of the writing, not so much the content.