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Each successive generation experiences market growth. No generation yet had ever deviated from this formula. And although the growth rate in established markets (US, Japan) may slow down, new markets will continue to open up.

Using anecdotal evidence to support your theories about waning genres leads to false conclusions though. For instance, Street Fighter 2 was a massive cultural phenomenon because it revolutionised the fighting genre by allowing players to select a range of characters with their own distinct set of moves; by the time SF3 came out, far superior games such as Virtua Fighter and Tekken had arrived on the scene and the 2D fighter was dead.

Soul Caliber 3 sold worse than it's predecessor because it wasn't as good, and people who'd already bought SC2 had no reason to buy another fighter that was nearly identical. The second release of a particular franchise on any given platform almost always sells less than the first (taking the PS2 as an example: MGS2>MGS3, GT3>GT4, FFX>FFX-2)

The key issue to bear in mind is that, as the market grows, so too does the competition. The bigger the pie, the more people that want a piece.