I think what really matters for the the success of a game is the expectation you have for it. If you expected a game like Tomb Raider to sell 8-10 Million lifetime ( just an example) than you will most probably struggle to reach that goal as a puplisher. If you have realistic expectations for a game than you will spend only as much money on producing and advertising a game as you think it will make money back with such an investment.
Thats the reason why some games are profitable with 1 million in sales and somenot with 3 million. If you think your game will sell 8 million lifetime and spend 50 million in marketing and the game will only sell 3 million lifetime than its no wonder that you will lose this battle.
Thats one of the reason why sony not advertise some games right because they know that some games will not sell well and they would do a mistake making 20 million marketing campagnes for such games as they will lose way more money this way. Thats the reason why some games get sequels which have only sold about 200-500k units because they dont spend much money in marketing the game and produce it cheap.
Not every game cost 20 million to make and get a 20 million marketing campagne.
The whole industry is highly profitable if you ask me, problem is that to many puplishers have unrealistic predictions and thats why some games will never made there money back.
And beside all the developer studios dying there is one question no one ask. How many new studios are born each year?
The whole videogame industry is in good shape. Especially with all the DLC and downloading content which can make a lot of money ( Little Bg Planet DLC for example)







