On the other hand the price paid for games has dropped massively, especially when indexed against inflation. Partly this is helped by digital distribution, but by creating a more direct relationship between the publisher and the customer, and drastically reducing piracy and eliminating reselling the required price per unit to make a profit as a game studio is really small. I've paid $5 for iOS games that gave me vastly more hours of enjoyment than games that I used to pay $50+ for.

For years those who supported the developers were subsidizing those who weren't. This is happening less now, and it's a more efficient market.

That's a good point. I probably bought more games from small indie developers on iOS the last few years than PS3 titles. Those indies wouldn't have access to the PS3 market.