Indirectly, it can be true ...

One of the main reasons game development budgets have exploded is that they require the work of a lot more people in order to create a larger quantity of higher quality graphical assets; with so many people working on a project it becomes amazingly difficult to manage the project to ensure consistent quality, and (in many cases) a small ammount of low quality work can spoil an otherwise excellent project. On top of this the large budget eliminates the publishers willingness to accept risk and the projects may have to follow a more "tried-and-tested" generic approach, and (in an attempt to keep costs reasonable) content is reduced making for a shorter game.

With less expensive development it is possible that a developer could produce a more original game with a greater quantity of content and more consistent quality throughout because the smaller development team was easier to manage, the publisher was more willing to take risk and there was less of a need to control expenses.

As an example, an experienced developer has a better chance of producing a great RPG if they have a $5 Million budget to produce a Nintendo DS game then producing a $20 Million RPG for the PS3. The reason is the budget is huge for a Nintendo DS game and the project would still be manageable for a (fairly average) experienced manager, while the budget is pretty typical for a PS3 game and the project is fairly large and complicated for all except for a very good manager.

wow does MGS4 really cost $70 million to develop

Combine that with an artifically high graphics standard for those platforms which necessitates a larger graphics budget...

no it just means that developers can make more money

As Barlog astutely reminded us, the more money in a game, the more limits on developer creativity.  I always hear defenders of the HD consoles say developers are trying to use them to make art, but what if art is exactly what's being held back by these huge graphics budgets? 

To put it in perspective, suppose a game like Mario Party 8 costs roughly $4 million in development (it might actually be less). If it takes in about $20 per unit at 4 million sales, that would create nearly $80 million revenue. I'm simplifying here a bit, but for argument sake that would make nearly a 2000% return on investment.

In order to produce a 2000% ROI for a $70 million budget game, it would have to rake in $1.4 billion in revenue. If one assumes $30 per unit, that would require sales of 46.6 million units.

Barlog just stated they were just getting used to 20-30 million dollar games so I assume that's on PS2 (last generation). Isn't Wii supposed to have better graphics than last generation consoles? The way Barlog is talking we should start expecting cheaper made games including cheaper than last generation. I really don't like the sound of that.

 Smidlee brings up an interesting point, if you extend out the thought.  If the PS2 was 20-30M, was the 30M at the beginning of its life when it was more unknown how to program all the new nuances.  And then closer to 20M at the end of its life when you could perhaps swipe code from other games you had done, twick it a bit and go with that?

Thus the Wii being close to the GameCube in design would have the lower costs built in, somewhat at least.

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+1 to FishyJoe.  So many will say how many games it takes to break even with the costs as if that were the only goal in mind.  Hopefully the true goal is to make a decent profit, enough to cover the costs and then some.  Ideally, it would be enough to produce 2 more games, in case one of them flops.  The only criticism is the simplification, Fish.  Revenue does not give you return on investment, income does.  Throw in a $4M in overhead (ads, production and shipping of the game), and come up with $76 in operational income.  1900%, while less, still isn't that bad. 

It's just an interest. A lot of develoeprs are saying they have interest in developing for the Wii but nothing concrete yet...

 Games have an approximate development time of 2 years and generally are announced about one year into development. I expect many developers would have waited until mid 2007 before putting many extra resources onto the Wii just to make sure it wasn't actually a fad so I expect a surge of third party Wii games announced in 2008. 

If it doesn't happen then the Wii third party doom sayers may just be right.