Profit is the number one concern for a business.
That being said, it's not one or the other. Just like movies. There's different genres and different sub-markets.
A high budget action game can sell a large portion of a smaller sub-market and make a profit. A low budget casual game can sell a small percentage of the overall market and make a profit.
The problem is costs. This generation of hardware was a big jump in developing the software to maximize the potential of the hardware and artistic assets got larger and larger.
As this new level becomes more explored that technology will already be there.
Movies share sets, props, etc. Games will be able to do this more and more. Once a "perfect" model of New York is made, why should they have to go through and redo the whole thing.
Along the lines of product placement. Why not have the characters wearing a designer and when you turn the game on have a little random blurb about one of the designers each time "Nikko's Wardorbe Provided by Versace" or have it on the price tag when you goto the store.
It doesn't all have to be Tacky and overdone like Crazy Taxi's version of San Fransico (where you better like KFC) or Sims IKEA.
I would cite regulation, but I know you will simply ignore it.
