I think what the industry has really lost is innovation and artistic spirit.
The real issue is a lot of the talented developers in the industry have been recruited my huge companies to work with code monkeys rather than to really draw out their own ideas fully.
The industry puts so much pressure on mass marketing and audio/visual benchmarks that the time, effort, and focus spent on creating fun, engaging, and MEMORABLE story and gameplay is no where near what it used to be.
During the next generation of consoles you will probably find yourself looking back at this generation of games and will be troubled to think of any games that really stand out (A LOT of sequels and rehashes).
Where most the talent moved:
1970-1985: PC/Atari 2600 (The original boom and crash of video games)
1985-1989: NES (Resurrection of the videogame industry)
1989-1995: SNES/Genesis (Golden Age of Cartridge Games)
1995-2000: Playstation/Saturn/Dreamcast (Compact Disc Games Boom)
2000-2006: Playstation2/GameCube (Cost rising but still stable enough for innovative games)
2006-2010: Talent is spread thin across many platforms (to appeal to more markets) with high costs (Trading innovation for sequels and "production value")
