Depending on what you actually count as a “video game” the industry is now generating somewhere between 200 and 350 billion dollars a year in annual revenue, making it by far the largest entertainment sector in the world regardless of whatever your exact definitions may be.
More people are playing video games than ever before, they are playing them for longer, and (the not so secret reality is that) video game companies have gotten a lot better at getting money out of them while they are.
Over what should have been the best half decade in the history of the industry, the overall market is down by as much as 30% from its peak, in the same time that the broader market has more than doubled.
Sooo how is it possible that even with record sales, record new revenue streams, record numbers of new players, and record new opportunities to monetize that new audience… video game companies have still managed to screw this up so badly?
While I’m not strictly arguing with your points here, I do feel like a lot of this thread is ignoring a lot of Japanese gaming companies, especially Sony, who have been playing the same game as microsoft, just on a smaller scale. Squeenix have also been obsessively chasing live service games, making dozens and then shutting them all down, most of them surviving 3 years or less. Meanwhile konami shut down their gaming development entirely (unless you include gambling games) not that long ago and have had 3rd party devs (like bloober team for silent hill 2) making anything involving their properties so they can back out anytime they want.