It's the same as anything. It's about finding a niche to fill and then differentiating your product.
What I really don't understand about the gaming industry is the succeed-then-sell-out model. I don't see how that's better for a publisher than them hiring their own teams and starting their own studios. I suppose you could say that they're after successful IPs more than the studios themselves, but for the most part that's only a short-term win.
A lot of what I've seen with studios closing is mismanagement. They get too big, too quickly. You read about relatively new studios laying off hundreds of people and you just know that the loans must have been massive. Smaller studios that focus on downloadable games are the future for independent developers. Only the big publishers can really afford the big releases.
