^This. It is the fault of the smaller companies themselves. Know your audience and budget appropriately. There were lots of smaller titles that did well in the past not because everyone bought them but because they were budgeted appropriately. For example, SMT, Tales and Disgaea have been going on for a while with no big budgets or big sales. It can be done and still gets done.

How to do it wrong despite starting the way I recommended: see Valkyria Chronicles series. It was first released on ps3 with a relatively small budget, started slow but amassed a mil + thanks to word of mouth then a brilliant strategist at Sega decided that it was better to switch to PSP for lower dev costs. Now that may seem in line with what I stated earlier but remember how I said  "know your audience"? VC2 on PSP was a terrible idea despite lower dev costs because the vast majority of VC1 sales were in NA where PSP was already dead and buried.

Not really, the only things that AAA titles are killing are the companies that make games with unrealistic expectations and excesive budget.

Yeah, FIV had way too big of budget and did not pay off. On the same note, I doubt Lightning Returns with it's downgraded graphics and reused models made any money.

I see what you're saying and agree with it was mismanagement of IPs, XV not being released in 8 years when that is the game most people were showing interest in and no one was showing interest in XIII. It looks like it will be a decade until it does release, being they still haven't announced an official release date. With how many man hours they have put into that game, I doubt no matter how much it sells it will be financially worth the investment. Especially if they release it before 2016, which there will be no way it will sell better than FF7 due to hardware sales and average game attach rate.

As far as Dragon Quest X goes, even releasing in the US it wouldn't have sold that much. Wii sales were dead and there weren't that many Wii U's in peoples houses in 2010-2012. I would like to see them release it now being there's around 6 million and climbing. This, I would say, was about the only smart move S-E has made. But I Think unless they release it worldwide soon that will have been a waste of an IP as well. 

The simple answer is no, AAA games are not killing the industry, but poorly made AAA games are killing the studios that create them. Say what you want about Call of Duty but it is an incredibly well made shooter. I haven't personally played an iteration since World at War as I don't like the modern setting, but back then it was everything you could want from a game. It was fun, had a decent story, and was incredibly well made, and that is why it became such a large franchise and also why the sales may now be slipping.

Create a game that you are passionate about, that people want to play, that you are going to take the time to make special, and it will sell well and make you money. Rush out a game, cutting features and your vision in the process, then prepare to close the doors of your studio. Look at No Man's Sky as an example of a passion project and look at how the gaming industry has got behind the game. Look at The Last of Us and Grand Theft Auto, at Borderlands and Assassin's Creed 4 (with Ashraf Ismail being so passionate), and look at Halo and now Destiny from Bungie. Look at The Witcher from CD Projekt RED and how people have reacted to that game.

To cut a long story short, passion and pride, and realism will sell your video game. If you a passionate about it enough that you will create something amazing, prideful enough that you will not ship it in a state less than perfect, and realistic enough with your expectations, you are going to make a profit. 

No, this industry has never been friendly. Ballooning budgets aren't helping though - especially on things like Kevin Spacey or ridiculous little graphical elements. Also not helping is anualization of titles like COD, AC and Batman. It's not leaving a lot of dollars for other AAA titles.

But I would wager if you still make a good game with a good concept and are smart with your resources you can do just fine. The latest failures are no different than Acclaim (gone) or Jeleco (out of games) that have come and gone over the years, or the many others who have been eaten up by bigger companies.

I haven't played the game personally but from all the reviews it seems like Murdered: Soul Suspect wasn't really a good game. Average at best. So maybe that had something to do with it not selling enough.

I'm not sure I'd say "killing", no.

But there is an inarguable fact that it's absolutely HURTING the games industry. Look at companies like THQ, Midway, Factor 5, Free Radical, etc. that have all gone out of business because overly expensive games they've made didn't make enough money in sales. Back in the SNES era, I'm quite sure that there were games that could sell 20k or even less, and still be considered a "success", because games back then didn't cost nearly as much to make. Now you have shit losing money even after selling a couple million copies. That's fucking ridiculous.

And even if sales and company financials weren't a factor, the more important issue is, this whole "AAA" blockbuster game phenomenon, has homogenized gaming. The "try to make games as much like a Hollywood film as we can" deal has been going on since the PS2 generation, but they've only gotten worse about it more recently. Now it seems every game has to have Hollywood quality special effects (or as close as they can get to that), actual Hollywood name actors doing the voice acting (which, quite frankly, is completely unnecessary), big sweeping Hollywood style orchestrated soundtracks, etc. etc. etc.

And while there is nothing at all INHERENTLY wrong with trying to make a cinematic, story-driven game, I have always personally felt that trying to make what basically amounts to "playable movies" is and has been the wrong direction for gaming to go in, for years. I personally do not want, and have very little interest in shiny, "cinematic" games with a glut of QTE sequences. I don't want my gaming reduced to pressing a couple buttons while I watch cut-scenes. And while no, that isn't ALL some of these games are, there is also an awful lot of that going on, and it gets rather tiresome.

To me, the most valueable and important element to a video game, has never changed, not once, since Pong back in the early 70s. Gameplay. If a game plays great, everything else is secondary. Great graphics, a good story, a great soundtrack, online modes, all that stuff can certainly be nice. But they are all FAR less important than whether or not the game is actually enjoyable to PLAY. If a game plays like shit, I don't care how HHD the graphics are, or that Brad Pitt is voicing the main character, or that the game has a really "deep, compelling story". It still plays like shit, and nothing can change that. And yes, minus the Pitt part, I've seen/played far too many games like that, and it is an ever growing trend, where gameplay and game mechanics quality are a secondary afterthought to those other things.

To me that's just wrong. And to me, a an awful lot of those "AAA" games seem to embody that. Some of them play great, yes. But not enough of them. And regardless, so many of them are just turning gaming into what Hollywood is: a hit factory. They try to make sequels to games that have sold a lot, or make games LIKE other games that have sold a lot, and in the process have bled quite a lot of the fun and creativity out of game development. They are just creating products to sell now, instead of actually trying to make good, inventive and fun video games. That isn't to say that gaming hasn't always needed to sell well to continue onward. Of course, it's a business. But just because it's a business, doesn't mean that you can't still actually put some effort into making something that breaks with convention, that was meant to be fun, not just to sell the most millions possible. And gamers are every bit as much to blame in this as the big studios, because they are the ones that rush out to Gamestop and pre-order the next CoD, the next Uncharted, the next Tomb Raider, the next Final Fantasy (if you even want to call them that anymore), the next Grand Theft Auto, the next Battlefield, the next Halo, the next Assassin's Creed (or now Watch_Dogs), etc. etc. etc.

If you ask me, while I do still like and appreciate companies like Nintendo, Atlus, Way Forward, Vanillaware, etc., I will also say that "thank God for indie developers" isn't too far off either.

And here we have it.