He claims that the industry is in danger because "[t]here are four or five simple game categories and nothing really new or different."
The categories are shooters, puzzles and mazes, adventure games, sports games, and simulations. That's it. Most of today's hottest games are combinations of two or three of these categories, with a storyline added to keep the players from being bored stiff. When my kids show me a game, I usually say that it's nothing but the same old running-jumping-kicking-shooting with a new background. They leave in a huff.
His other complaint is that some games today are too hard:
If [the never-ending quest for more realistic graphics] doesn't flatten the market, the never-ending need to satisfy the demanding full-time game-player should do it. Some of today's games are ridiculously hard to play—unless gaming is your so-called life—and so daunting to casual players that they will quickly reject them. Who needs to devote themselves to a game just to play it once in a while? I'll take Spider Solitaire instead.
By the same arguments, the movie industry should have tanked by now as well. Go into any video store and you'll see about 6-10 categories of movies (comedies, drama, horror, anime, etc.) and the art films that are so esoteric that only a hardcore movie fan can possibly fathom the inner meaning of the film, let alone stand to watch more than the first 20 minutes of it.
The video game industry is currently going through a transitional phase similar to the film industry's multiple transitions from silent films to "talkies" to color. Admittedly, we're on a much faster pace than the film industry, but that doesn't mean it's happening.
The early days (1970-1984) were essentially the "silent era" for video games. Most games were developed either solo, or with small teams. A game development cycle could be measured in days or weeks, and innovation was driven by creating focused experiences. Developers spent their time trying to find a small, fun core and implement it in as small a space as possible to save on costs. Most original Atari 2600 cartridges were only able to store four kilobytes. Similarly, silent films were smaller, focused experiences. Most were less than 30 minutes in length, and focused on very specific experiences that could be expressed sans sound.
The next ten years (1984-1994) were the "talkie era" for video games. Games became longer and more in-depth, graphics improved from four color to 16-bit color (65,536 colors), audio went from blips and bloops to speech and symphonic scores. Many of the musical scores from this era are still remembered fondly today, be they from Super Mario Brothers or Final Fantasy. While there was still innovation during this era, most successful games refined and expanded on previous play mechanics. Similarly, "talkies" were longer, had better film quality, could tell deeper and more intricate stories and provide people with more memorable experiences. While there were still some innovative films, most films simply told takes on older stories with more flair.
The last ten years (1994-2004) were the "color film era" for video games. With the launch of Sony's Playstation in Japan in December 1994, the third dimension was open to us. There was a lot of effort put in place to bring the mechanics of old to the new world. A lot of companies could not make the transition, and faded into obscurity, bankruptcy or both. Some companies made games that challenged our perceptions of what could be done with this newfound power, and lots of them were either acquired (ION Storm/"Deux Ex", Bungie/"Halo," "Marathon," "Myth") or faded into the ether (Looking Glass Studios/"Thief," "System Shock"). Some innovators were coddled and supported by their new corporate masters, like Wil Wright ("The Sims"), and as a result, created boucoup dollars. Other innovators chafed under corporate control, and went off to do their own things with mixed results. Still others said, "Hey, you know what, we don't really have any gameplay, so we're just going to make something that looks beautiful." Again, "color films" did the same things.
Now we're entering the digital age. The old business models are being challenged by electronic distribution, teams that used to exist in a single room are now spread out over the earth, outsourcing of assets is becoming commonplace, and just like the movie industry only a small percentage of titles are making back what it costs to make them. Things are going to be a little weird for a bit during the transition. In the last few years, we've graphically moved from being able to do "Tron"-style graphics in real-time to being able to do graphics that rival "Final Fantasy: The Spirits Within" in real-time. However, it has come at a cost. Up until recently, most of the work for graphics has been done on the CPU. Now, thanks to shaders, we can move that work to the graphics card and use those freed cycles for the innovation that this industry lives on.
I'm going to offer you an example: "Halo 2" vs. "Katamari Damacy." "Halo 2" is an evolution of the genre, a refinement if you will. Graphically polished, visually stunning, smart enemies, but the gameplay itself was a relatively minor step up from "Halo." "Katamari Damacy" is anything but visually stunning. To be honest, while the game does have a quirky surrealistic vibe going for it, the game is still damn ugly. However, because of the minimalistic approach to graphics, Namco was able to create one of the most innovative games in recent history.
Because the CPU is doing so much of our graphics work right now, we have to make that tradeoff (simple gameplay/beautiful graphics, or ugly as sin/amazing gameplay), similar to how modelbuilders and special effects technicians had to make tradeoffs in films. With shaders becoming more and more complex and our graphics chipsets able to handle these shaders, we will soon be limited solely by our imaginations.
Do I know what the future holds for this industry? No. I wish I did, but I don't. But I can look back at history and try to apply it to the modern era. At every transition in the film industry, there were nay-sayers that thought that the current shift would doom the industry to failure. "Talkies won't make money." "Color is too expensive." "Digital effects look horrible." I can feel happy knowing that our industry now has its own short-sighted nay-sayer that will quickly be proven wrong.