This situation reminds me of something relating back to House of Lies last night.
The Term "Hood Rich".
When someone from the hood/ghetto get rich quick and spends uncontrollably to obtain all the ridiculous **** you see in music videos and movies and are unable to leave "the hood" behind. The reason why "Hood Rich" people usually end up back in the hood is that they don't realize how much it cost to maintain all the things they just spent their riches obtaining.
How this relates to the gaming industry, is we all of sudden got Sony (& MS) the tech giant pushing all these new and expensive technologies into the consoles (the loss leader approach), the developers get their taste of dedicated performance and want to continue to push the envelope as their games are looking nicer, and they have so much more freedoms in design and scope. They get all these ambitious ideas that require more and more expensive technology, to which Sony (& MS) are happy to provide (regardless of how much it is actually costing them in the short term). What they don't realize is that by the time they have created what they originally envisioned 3-4 years ago, they have spent millions on staff, millions more on marketing, and are way over what their intended budget was.
Let's say the game does well enough to get sequels, well now the bar has been set, expectations have been raised and you need something that looks as good, plays as well and is even bigger to follow it up.... problem is, that just took you years to accomplish.
The studio next to you is trying to out do you and they are going way over budget to achieve such visual clarity,depth, detail. The next studio over get ignore because their game doesn't look anywhere near that level visually, regardless of if the game is actually any good or better.
The point is, that it's nice to want nice things, but you don't always need them to get the job done.
Games have become so complex and expensive due to the technological push, that they have to make blockbuster numbers to get decent returns on every game made. and as much as a developer loves to work on the most modern setup available, it all comes at a cost that was previously overlooked until it was staring them in the face.
that price at this point is increased dev time, which leads to increased dev cost, which means bigger budgets (for more people) and bigger sales targets to break even.
It's that hidden cost that is killing everyone. More Detail = More Time = More Money