Video games have come a heck of a long way over the years. From the days of 2D 8-bit to the days of 3D @ 1080p. Technologically, artistically and interactively they have increased at exponential rates. Until now.
Don't get me wrong, I still believe in Moore's law. We will still continue to progress technologically and be able to process more polygons to gaming shreds, and growth should continue there. However, I think that video games have reached a plateau now.
We are approaching the point at which better graphics can only be perceived by people if advertising tells them it is better. Again, don't get me wrong, I think there are some phenomenal new games with great graphics but it's getting to the point where there are less quantum leaps at least in the perception of the average person. There's no more "Holy crap that's awesome" effect like the progress made in the 80's and 90's. Take the Halo series, great games, but look at Halo and then look at Halo 3, has much really changed? Maybe, but it's certainly not enough to justify the huge increase in work hours to make it and the limited increase of amazement by the average gamer.
I've been seeing it before the recession. The bad economy just makes it painfully obvious. Current gen titles(PC, 360, PS3) for all but a few companies are hardly profitable and for everyone too costly. Production teams have become bloated machines of hundreds of people that serve as cogs rather than the creative ingenuous people that they are. So much time is spent on detail in art and coding but the experience is often not measuring up to previous generations of video gaming. We'll call it a bad 'economies of scale.' More effort for less return cannot continue. I worry that there are really not many companies out there that are truly doing well with current gen development. Sure there's companies like Epic that are pulling in great profit, but at what cost? They overwork their employees and burn them out, or might lack the creativity and community that people (should) want in the work place.
Take a look at the platforms themselves, Sony is having a hard time with the PS3, which is now well justified as a quality product (much more than many would have said at launch). I've read rumors that Nintendo may have started a trend with the Wii for gaming platforms to not push the technological envelope in the same manner that they once did. New consoles may have little to no improvement on processing power and such.
The writing is on the wall: technological growth is slowing for video games. I predict we are entering a phase where it will plateau out for a while.
I'm not one to think that this is either permanent, nor that we won't find another area of technology to push the envelope. I'm just saying, we don't really need higher polycount budgets now. What I can see is a tangent of technological advance with hybrid reality, virtual reality, or augmented reality. None of these technologies are really new, but I think there might be a new interest in them in the coming years. Most of these will depend more on companies' ability to market them and societies' willingness to accept and embrace them.
So what's the brightside? This is not all doom and gloom, it actually is a really exciting trend if you ask me. If you know that you are in a dark room, find the door and step out into the brightside. This silly metaphor goes to say that we can simply free ourselves of the lack of technological growth by growing in other ways, that many have said needed to happen sooner. Think of how many great novels have been written since the medium reached its limits, or how many fantastic films have been made since all the cinematography tricks and camera tech have been figured out. Not having to prove the technology every time you make a creative work is a very liberating thing. One that has birthed many great works on older media and will likely do so with video games as well. Developers will spend more time making a fun gaming experience and less time fighting the technology. Welcome to the 'New Plateau.'