The quality of games in general went down so releasing games piecemeal generally became a lot less appealing to do. You want people to plop down the full 50-60 for your PoS. Also, games became shorter meaning splitting it up into satisfying sections became harder as well.
I disagree.
Simply because the market has grown to include some games that are not AAA does not necessarily mean that the quality of games has gone down.
Dragon Age, Mafia II, Batman AA, COD4, Oblivion, Dirt 2, BFBC2, Borderlands, Crysis, DOW2, COH, SC2, TF2, Fahrenheit etc
These are just very high quality games I have played the last 11 years off the top of my head. I am sure there are many more.
Is there crap? Yes there is.
Was there crap before? Definitely.
The key difference may be that now the market has grown compounded by the fact that less than AAA games are more accessible due to the online marketplace growing so much.
However due to the number of indie games that have served me well at a very low price in the last 11 years I do not see this as an absolute downside either.