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Sky Render said:
The market only remains unfriendly to those who attempt to enter it the same way that everybody else does. As I noted, few have the sort of financial muscle to play the game the way Sony and Microsoft do, ie. brute-force entry into a mostly unwilling market, with hardware selling at a loss to ensure a high level of hardware distribution as quickly as possible. Those who take Nintendo's approach of providing people with a new way to play games instead of an old way to play games with incrementally better visuals and audio have a far better chance of success.

As for game budgets getting overboard, that's because developers choose to bling their games out with top-of-the-line graphics and other such audio-visual gimmicks. Quite frankly, they could make far more by producing games that large numbers of people want to play, and forget about making them look and sound like they came out of Hollywood. While some may like the idea of combining the cinema into gaming, most are content to play their games and watch their movies, with the only overlap between the two being licensed games based off of movies and licensed movies based off of games.

you forget that "new ways of playing" don't happen every gen, rather, they happen every 2-3 gens, thus, you can't have a competitor "innovate" their way into the market every gen