The market's becoming saturated for starters, including top quality games.
The problem is that only a portion of the core audience buys more than one full priced ($50-60) game per month. Offhand, particularly if you own more than one console, there is almost always more than one game a month that stands out as a major release.
If not relying upon the core audience to buy more releases, it's up to the new consumers, who typically buy more games during the first year of console ownership, to pick up the slack.
Whether it's because of the economy or because interest has dropped among those who have already owned their console for 4-5 years, the effect is the same: consumers are picking and choosing a lot more selectively, and in some cases, simply buying less.
With DL games for all consoles (VC/Wiiware, PSN, XBLA) there are other cheaper options available as well.
Add to that the issue of major franchise sequels that are generally guaranteed to take sales (Halo, CoD) compared to lesser known games and the market becomes that much more squeezed.
