Is it possible that the market is now so saturated with games of all kinds that it's simply hard to find enough customers to care about each separate product? Between smartphone app stores, Facebook games, a half dozen different consoles, an endless supply of entertainment through Steam, Kickstarter and (basically free) Bundles of all sorts, it must be really difficult to stand out without a truly unique product and phenomenal marketing.
As some of you folks pointed out, it's turning into a race to the bottom similar to the music industry, where people won't even play your product for free, even when it's really high quality. Think of all the games you accumulated through Steam sales and never even touched. It's a brutal war over the spare time of the average gamer, and it's highly contested space.
I don't know about games but in indie music the market used to be saturated by free mediocre music, and now it's starting to become saturated by free good music. But not because the musicians want to generously give all their music away for free, it's because they're all chasing the same goal of "if I give some away for free, the marketing boost will make up for it". And as more people enter the market, that belief gets less and less valid. I think there might be a lot of parallels with game-making. A popular thing to produce but the "game theory" behind it is tough as everyone races to destruction. I keep hoping that something like repeated-prisoners-dilemma will happen, where producers collectively decide to act in a way that is in everyone's best interest.
The market is saturated by mediocre-to-average games. There's plenty of room for truly great stuff.
Just today we heard about Banished, a beautiful city builder game in development by one guy which has hardcore PC gamers (jaded creatures indeed) very excited:
It used to be that there was only a very narrow market for games, but now there is casual, hard core, mobile, tablet and console, desktop, MMO's, indy, web. But to offset that the market is also much bigger and more inclusive. There are people that now pay for video games that would never have bought a Nintendo or an Xbox. If you want to make money in video games you have to find a niche and give that audience quality versions of what they want.
As some of you folks pointed out, it's turning into a race to the bottom similar to the music industry, where people won't even play your product for free, even when it's really high quality. Think of all the games you accumulated through Steam sales and never even touched. It's a brutal war over the spare time of the average gamer, and it's highly contested space.