The problem with the growth of the game industry is that every new AAA game needs to outspend every AAA game that came before it. By outspend I mean better graphics, more sounds, more models, bigger worlds, real physics, voice acting for every character, and so on. However, game sales per game are relatively the same as they always were and games cost about the same too.
What this means is that each game is a bigger risk to publishers. There are more failures each of which cost more. So publishers need to stick to licenses and sequels because they can cost less to make (Madden 2004 vs. Madden 2005) and are more likely to sell due to an installed fanbase.
Titan Quest is a good example of how this has gone wrong. It comes on 5 CDs. The world is huge, with detailed models, voice acting for all the characters, and handcrafted levels. The problem is that the game itself is boring. Although the world is huge, the gameplay is the same the last 40 hours as it is the first hour. You don’t notice the detail on the models because you will always play with the camera zoomed out. You don’t listen to the voice acting because the voice acting is boring and too slow. Plus all the usual complaints apply: The characters are unbalanced, the game doesn’t ramp up in difficulty, the story is background filler, etc.
Diablo 2, which is what Titan Quest copied, I would guess has an equal sized or roughly smaller world. Yet it is far more fun and interesting, despite being a 2D game and coming on fewer CDs.
How many games have you seen with the latest physics which have no relevance on the gameplay at all? Other than Half Life 2 that would be all of them for me. How many older games do you know of, with 10% worse graphics that are far more fun than a more recent game?
A game is not just a contract to develop thousands of models, huge worlds, the latest physics, and special shaders. It’s an artform and iterative process to make something that is fun and interesting. Judging by recent games, very few developers seem to iteratively playtest their games these days.