This has all been long in the coming, it's time for a reality check. Gaming, movies, and music have all taken hits, and it's mostly about failing to understand markets, demographics and efficient use of funds, paired with meddling and boardroom directing. As for the gaming industry and its woes; I can see a clear line in the sand from the point where it changed from being run by people who loved making video games to people who loved making money.

Personally I'm glad exclusives are all but dead. Buying one piece of hardware and being able to play most everything is fantastic. Especially on PC where I don't have to pay for online nor buy new controllers every generation.

SeriesX + ps5 + online + storage upgrade is pushing 2k over a generation.  Heck of a nice PC for 2k that can be easily upgraded when next gen consoles launch.  

Japan has strong labor laws that protect from arbitrary employee dismissals. There's no magic sauce involved here or anything.

Downsizing is also the obvious answer to the current economic bubble the industry lived through during the COVID years.
Once they realized their long term investments were not as sustainable as they thought, they're now changing course and thus with average labor laws to the protection of employees, facilate what we are currently seeing.

Anyway, once or if the cycle stabilize itself after a few years, expect to see the same cycle repeat again.

Movie, TV, game budgets are all going to come under intense scrutiny in the next 5-10 years.

Cyberpunk 2077 has a budget of almost $450 million dollars and that's actually lower than it would be because most of the game's staff are in Poland where the average salary is way lower than Japan, USA, UK, etc.

GTA6 will almost definitely be over $500 mill (so more than half a billion dollars).

Like, lol, who thinks going from here to even 2x-3x more than this for the PS6 era while keeping game prices fixed at $60-$70 is workable in any way?

Even for Nintendo this is going to be an issue, Tears of the Kingdom probably was the most expensive game they've ever made, but the next Zelda on the Switch 2 is likely to cost several times more than that. Now luckily for Nintendo, they don't have that many high budget games, but Mario Kart, the next Zelda, and a few other of their IP are likely going to cost serious coin.

The fact is you don't get anything for free. You want wildly improving visual fidelity ... well people need to be paid to make that possible ... hundreds, maybe even thousands of them working for several years. You have to pay people.

Most Japanese devs have given up on the graphics arms race too. 

You look at almost all Japanese games, most of them don't really push the envelope visually anymore. It's basically just the Final Fantasy games and even that like FF7 Rebirth is clearly just remixing a lot of PS4-era assets and still running on the older Unreal Engine 4 from last gen. If it didn't do that you'd probably be waiting another 2 years for this game to come out. 

Looking at Capcom, it's going to be like 5 years into this gen before they release a major game that isn't a PS4-cross gen title, and quite frankly Monster Hunter Wilds looks fairly underwhelming for a generational graphics leap (probably they are targeting a Switch 2 version because it will sell like 10 million copies there and they can't say no to that). 

If they were developing from scratch, it would definitely have been faster to use UE5 than UE4 for Rebirth, though.

I'd chalk it up more to the fact SE won't need to retrain a development team already used to the older engine, which can also run in older workstations, and has a fairly well-known and documented physics solution (PhysX) embedded into it.

As for Capcom, no idea how long they've been developing that game for, or how many people are working on it, or how it'll look when it launches, but MH has always been kind of cheap, hasn't it? Probably because these games were usually rushed into the market when they worked with two teams alternating releases every year.

Capcom is releasing Dragon's Dogma 2 in just a few weeks lol. 

I agree with your other points though. Pragmata would probably the most graphically impressive looking game Capcom puts out before the next Resident Evil releases. 

When Nintendo was struggling during the Wii U era several executives took pay cuts instead of laying off staff. 

I do appreciate everyone who checked out the video in the OP. It does help out my small channel, which focuses on gaming news and lets plays.