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There is an ongoing crisis for console development but that ecilpses JRPGs - it is almost impossible to create a lengthy experience that conforms with High Definition expectations without heavily recycling assets like Bethesda does, and even that is now taking them a concerningly long time to do. The spread of the cinematic game is not other genres "catching up;" it's literally all they have left in an era with astronomical costs and unprecedented publisher closures. It's created a culture where almost every game is a 10-20 hour experience with optional multiplayer, leading gamers to consume it in a single playthrough before selling it back to GameStop to buy the next one. This leads to lower game prices, which fuels larger backlogs, encouraging more single playthroughs and now the culture of consuming games like cigarettes is spiraling out of control, devaluing games on a whole and possibly suggesting a second crash. It makes me skeptical that people talk of the Japanese gaming industry declining whereas it's simply evolved to survive: you never hear of a Konami or Namco Bandai going out of business, whereas we lost Midway at the beginning of last generation and THQ at the end of it. I don't think people appreciate how alarming that is, especially with Microsoft and Nintendo both struggling to gain traction with their newest systems.
I don't disagree with your breakdown of the market model of gaming in general, but I don't feel it is to blame for the genre floundering since A) we were seeing this model hit full stride over ten years ago when, as I showed above, JRPGs were still strong contenders; and B) Most JRPGs from the PS2 era onward are not as long as people think they are and thus they can still work within the framework of the model. I mean beating FFX would take about 30 hours, even FFXII would probably be in the 40 hour range at best if all you are doing is the main campaign/slash story. That "over 100 hours of gameplay" nonsense comes from all the post-game/sidequest crap. Most of the JRPGs I can think of that would take over 50 hours just to complete the story portion are PS1 games like FFVII, VIII, Xenogears, and DQVII. So I feel JRPGs long ago adapted to the model. I still blame its fall in the West to both a shift towards disinterest in console RPGs in Japan brought upon by mobile gaming, as well as other genres shifting towards a heavier foruc on story telling, cinematics, and character development which stole one of the strengths of JRPGs while the genre struggled to figure out what to do with adapting their format to the market trends and new console specs while still being cost effective.