People want bigger, prettier, more lavish games with far more features. It is the army of artists that pushes up the cost, to create all the high-def art assets, but that is not the only thing: more MP modes, more online features, more companion apps, and above all, more marketing will push the cost ever higher, as the industry is saying.
The list of downsized/closed top-tier developers is very, very long. Saying it is just people with no talent is arrogant in my opinion: surely no-one here says that Irrational, Criterion or Sony Santa Monica (just to give few examples) are talentless? And yet top-tier developers are being closed/downsized too.