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http://en.wikipedia.org/wiki/Short-run

Firms have too high of a cost, right now they're trying to reduce it, while increasing revenue.

Eventually though, some firms will drop out, supply will go down, revenue will rise, and the companies will break even again.

With three fucking games, (Heavy Rain, Bad Company 2 [preordered], and God of War III) coming out within weeks of each other, I think it's reasonable that the game industry will shrink. With the economy, lack of disposable income, huge cost to buy games, and shear number of them, SOMEBODY has to give.