At this year's Game Developer's Conference developers are lamenting that the game industry has been warped beyond recognition:
Wal-Mart drives development decisions now. When publishers minimise risk by kow-towing to the retailers, you have a serious problem. When every game has to either be a blockbuster or a student film, we got a real problem. For my end of the game business all of our efforts are going into reaching a mainstream audience who may well even not be interested in what we do! My first game cost me 273,000 dollars. My next one is BLAH millions. How many of you work on games that make money? 4 out of 5 games lose money, according to one pundit who may be lying, admittedly. Can we do any worse if we just trusted the creative folks entirely instead of the publishers?
The game industry model is increasingly becoming like the movie industry model where most ventures cost millions and most lose money. The problem is that, unlike the movie industry where an indie film can be made at 1/1000th the cost of a big budget title, even indie games have to have reasonably good production values to be competitive. There is no "Blair Witch Project" scenario in the game industry -- i.e. a game that costs say $100,000 to make but makes $100 million.
As a result, the model where 4 out of 5 games losing money is death to indie game developers leaving us with only mega publishers churning out "More of the same IV".