Capcom sucking has little to do with this.
As for the Square games, all we know is that they did not reach goal. We do not know how much of a return they produced. It might have been worthwhile even if not to Square's hopes.
The thing about game development is that it's a gamble. Every new IP is a gamble. What many publishers have decided to do, then, is to bet big. That's really all it comes down to. They're trying to win with home-runs instead of a string of singles. I'm not even sure it's a worse strategy. Surviving on small hits is not easy, as one dud can close you down and two in a row is almost certain doom.
Also, let's be real. The reason for all this is that consumers started skipping over smaller games in favor of massive games. We can complain but GTA 5 and Battlefield 4 are going to sell a TON of copies.
Massive games with massive budgets are actually fine, to be honest. The segment that needs to reduce its budget are the mid-level games. They have to find ways to reduce costs. They also need to drop their prices when its obvious they don't match up to top-level games.
