More powerful hardware is no excuse for failing to profit. Not every game has to be Halo, Uncharted, ect. Just like not every movie is Lord of the Rings or Avatar. Their is room for many kinds of games and apps on every platform. If these publishers that are around currently are unable to succeed, there are hundreds more willing to take their place.

Regardless of the power of the next gen consoles, the market is only continuing to grow. That in its self is just as big a problem for these narrow minded game publishers. Extra competition from Warner, Disney, and other established media companies will prove massive trouble for the likes of THQ.

That is if the big 3 allow their systems to become more open. Microsoft is a little strict, Sony is decent but both of them aren't good enough. They need to replicate what steam has done for PC developers. 

You'll still need publishers for marketing & advertising (at least for bigger games that need exposure and it can get expensive).

The games with the biggest budgits will need to be marketed the most, the games with the biggest budgets will also have publishers. Games being sold digitally won't need to achieve as many sales to be successful and therefore won't need much marketing. The way these games are promoted is on the store, and since PSN/XBLA should have a much larger presence and be of much larger importance if a larger focus is on digital downloads, many more people will be on the stores, seeing these games.

Again, look to steam. It's full of indie games and games publised by mid-tier publishers, the first thing you see when you open steam is new games that are available and deals on games. This is how you promote indie titles or titles on a smaller marketing budgit. It works very well for them.

What you're saying is true with smaller/mid games and Steam.  I guess I shouldn't have quoted you but i was thinking more align with the original topic that was about bigger budget games that could potentially lead development studios to go under.   Those games will still need help with marketing & advertising.

Next gen console will be easier to develop for. We will probably see the first gen where the hardware supports more than devs can push. Most PC games don't use 4GB of RAM on Ultra settings, and that's the rumored spec for next gen systems. This whole "too expensive" thing is a complete lie. And if developers don't have the cash to make these huge, awesome, pretty games, make games look like now, just rendered in 1080p60. Just make sure the gameplay is innovative.

 But wouldn't games with bigger budgets have rich publishers? My scenario (steam scenario) works for Indie devs and devs owned/partnered with mid-tier publishers. If the dev is partnered with a bigger publisher, like EA or SCEA, money for marketing won't be a problem for them. It isn't the perfect solution, but I think it's the best one, it tries not to leave anyone out and supports indies.

If they finally get it in their heads how to run a business properly, yeah developers and publishers can afford next-gen.

That's entirely up to developers themselves.
I'm perfectly happy with current gen games running at 1080p60. But if they want to push each other to get the most shiniest pixel award then good luck to them.
If all the enhancements they can afford now for pc come to consoles next gen it will be a big enough leap for me.

i've said this in 2010 and i'll say it again. we are not ready for the 8th gen. i remember many saying they would pay $70-$100 for games next gen., and i still find that laughable.

dev. cost will go up as i mentioned, basicaly everything said in the op is what i said in 2010.

seems i was a bit random in 2010 lol

http://gamrconnect.vgchartz.com/thread.php?id=107424&page=1