Games are fine as storytelling medium. I've played many games that show that plainly. The problem is that games necessitate a need to be fun which hampers and limits it storytelling capabilities. Therefore, a good game story might not even have good gameplay. Silent Hill 2 has the best game story of all time and its gameplay is between serviceable and trash. On the other hand, a good movie story only enhances a good movie.
I don't disagree with that, but i'd still consider that a problem of mostly
cinematic games.
Silent Hill 2 does more than just funnel you into the next cutscene, as far as storytelling goes, but it's still very much unambitious when it comes to trying to break from the survival horror mold (SH2 is my favorite game, so i ain't even shitting on it), which is why the gameplay becomes serviceable at best, shit at worst, and it's still what i'd consider a cinematic game.
I think videogames interested in propelling forward good storytelling within the medium, should look into how games like DayZ or Civilization, or what have you, can tell a story through player's action, instead of trying to peg a square into a round hole, like most games do.
I'm not saying it's an easy solution to find, but it's where we should start looking for it.
That said, i am aware that most games are just fine being toys and nothing more; i don't think Guitar Hero cares that much about its storytelling, more than a carnival game of whack a mole would.