i'm not sure the analogy with films works too well.
Fundamentally solid and engaging gameplay can be created at a relatively low cost, the game won't potentially be as polished or as deep/complicated as a large budget title, but you can make something addictive and popular. Peggle springs to mind and those popcap thingies.
... actually it does work doesn't it? lol. That's just a mirror of indie films - but i think games , for whatever reason, do better. I guess perhaps down to the larger price differential between those games and big name games.
Or like T.V shows that sell like gangbusters on DVd. I just think that this industry still hasn't realized that if you wanna do a really big game and you want it to make a lot of money, then you better make a game that can compete with other big games.
Doesn't matter if you spend 50 million dollars in your game if it looks like a crappy game. The Golden Watch (?) had a mega budget behind it and it tanked at the box office, why? Because it was a lame movie.
Bombs happen. If the funding channel of the industry can't cover it, then there's something wrong with the channel. Everyone has been saying for years that the Industry needs to adopt another model for funding games, a publisher dropping 50 on its own in a game just doesn't make a whole lot of sense.
I think the 360 price drop was meant to make it stop selling 200k a month. We will see what happens from now on.
but what do they need to do now? (that they haven't yet done?)
i mean MS is the only company that, other than making a crappy RRoDying hardware, made all the right choices/decisions:
- price
- hardware easy to develop games for (very close to PC)
- first party titles... and gears (soon to be a flagship title, dethroning halo imo)
- online
- Arcade
- OS
- swaying Japanese devs and even securing exclusives
i mean if i were them i'd be out of ideas, poor guys 
Now they need to keep going with the flow man. Try to bring even better games, and sure try some of that casual shite too, try to offer both, try to keep expanding the online functionality.
If they do that they will keep making existing fans happy, and however slowly, make new fans happy, which means that next gen they will have a bigger fanbase ready to take the next step with them.
Look, you don't need to be the biggest club in the world in order to be a big club. Life goes on, you always try the next big thing. Look at Warner Brothers, Batman Begins did "ok" all things considered, then TDK came and bam.
It's business, nothing ever stops, there's always the next move.
