The publishers are already on the road to solving these issues.
(A) Digital distribution. By cutting out the middlemen (retail & distribution), net revenue will about double, assuming prices stay in the same ballpark, for the same grade of product. More income justifies more dev cost.
(B) Lots of small, cheap titles as downloadables, and only a few blockbusters in heavily cemented "stock" genres (i.e. shooters, sports, etc.)
(C) More investments in handheld titles, as handhelds really are taking off.
and something console manufacturers are doing to support small devs:
(D) Lots of appealing options for startup devs to self-publish via PSN, XBLA, WiiWare.
In the next few years, you'll see publishers *really* pushing downloadable titles, and the retailers will be up in arms over it (since it will eventually cost them their business).
