The AP posted this story today outlining the state of the video game industry - and from looking at the list things aren't going so well. Company after company, from EA to Microsoft to Nintendo to Sony, are showing decreased revenues and/or losses from core video game products and services.
I'm far from a financial or industry expert, but it seems to me that the industry (particularly the console gaming industry) has been milking the cash cows of the current platforms for far too long and it's starting to catch up with them. The Wii, PS3 and XBOX 360 are very old by video game standards and the games themselves are starting be hamstrung by their aging technology. And most people who were ever going to buy one of these consoles has probably already done so - new products like the XBOX 360 Kinect notwithstanding.
But the software companies can't lay all the blame on the consoles either. I've gone on at length about my disappointments with EA, but they aren't the only company dropping the ball. Take-Two Interactive pushed back the release of BioShock Infinite from October 2012 to the end of February 2013 and took a 6% hit in stock price. And Activision Blizzard Inc. is showing lower revenue for their games as well - which isn't surprising considering their yearly Call of Duty releases are practically indistinguishable from each other.
Add all of this to the fact that games on platforms like the new iPad are increasingly more beautiful and engaging, and the console/traditional video game industry looks like it's in trouble. I understand why in a down-economy companies like Microsoft, Sony and Nintendo decided to stick with the current consoles and only make iterative improvements. But if they want to succeed in the future, the time to come up with some real innovation is now.