Personally I think that the main problem came from gamers (specially hardercore ones), they got used that every new game, will be better than every already released game in every way, and as such they demand new gamesto have better gfx,voicing, animation, audio, story....
I dont understand how you can even consider this a problem, its the same with every product in the world that is not consumable. Its not a problem, its simple logic:
Unless the new product offerings are better than the current product you own, you have absolutely no incentive to buy it. This should be obvious to anyone.
You would not buy a new TV unless the new one offered some advantages\gains compared to your old TV.
Same things applies to games, if a new game doesn't offer a better experience than what you currently own, why the hell would you buy it?
Now there is only one way of getting better, that is spending more (contract more/better guys, create/licencing more tech).
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This in incorrect. You are forgetting that for each game a developer makes, he learns something, and since you can "allways" reuse the assets\code from the old games that you have made, there is absolutely nothing suggesting that you have to spend more in order to make a better game.
Lets take Gears of War for example. The costs of developing GoW where high, new engine, new platform etc. Gears of War 2, is without doubt a better game technically than Gears of war 1, however, its very unlikely that it costed more than GoW1.
Why?
Because when Epic began making GoW2, they did not have to start from scratch. They allready had a complete engine, assets etc. Aside from creating new assets for new levels etc, they can simply reuse or tweak what they have allready created in GoW1. The budget for GoW2, thus could smaller than GoW1, simply because a lot of stuff that they use where allready inplace, that just needed some tweaks.
So unless every developer in the world would delete all that they had created upon finishing each game, they certainly do not have to spend more in order to create a better game next time around. (Althought, in some cases ofcourse, the results from starting from scratch might outweigh the savings in costs). Unless the dev changes hardware platform, its absolutely no necessity that the next game will be more expensive to create than the previous one, even if its better.