I think gaming is slowly improving.
Fans of Extra Credits, a lot of this will sound familiar...
Nintendo's DS and Wii brought in a lot of new fans. This, along with social networking, browser, and smart phone games have led to a broadening demographic. Gaming is finally approaching universal acceptance. Social networking, browser games, and smart phones expanding as gaming platforms, along with Wiiware, XBLI/Aracade, PSN, and steam give independents several low-budget platforms, which provides them with more chances to take creative risks. This is where great innovation will come from in the future.
Several major developers (especially Nintendo and Capcom) are bringing older styles back to the mainstream, while others (Bioware, Bethesda, Blizzard, Rockstar, and...Capcom...again) are making games that are bigger and more detailed than ever before. Huge genre variety, even in the AAA industry? Yes please!
This console industry has had the fortunate side-effect of lasting long enough for graphics technology to advance without gaming, which will hopefully have the long-term effect of consoles (as long as they are the dominant platforms) never having to be extremely expensive to be a major technical upgrade over the predecessor. In addition to gaming lagging behind and having cheaper tech, graphics are slowly peaking, meaning less of the budget will be spent on detail--they'll rely more on style and put more money into writing, acting, ect.
DLC can easily be abused (like Capcom does. Hey, they can't be 100% good, can they?), but it also offers unique opportunities for developers and publishers--they no longer need to be at the mercy of gamestop's used games system. I'll use Modern Warfare 3 as an example. They could have the online capabilities as on-disc DLC that costs $20. Why would that be a good thing? Because they could sale the actual game disc for $35. Fans spend less money, those who aren't interested in the online scene are more likely to buy new, others could buy the disc one week and unlock the online a couple weeks later if they couldn't afford the whole thing at once,
and Activision would make more money because those who buy used still need to unlock the online--overall, we spend less, they make more. Oh, and DLC offers the opportunity for smaller, cheaper expansion packs with easy delivery. Both of these will make games more profitable, which offers more freedom for creative risks.
As for your criticism of cash-cow franchises and leader-following, well...some cash cows have routinely been a source of great innovations (especially Zelda and Mario), and even when they aren't, they still get tons of money for the developer/publisher to fund riskier games (like...Capcom. Again). And leader-following has always been an issue with gaming (and entertainment as a whole). At least today, there are more leaders to follow, which--in a weird, backwards way still kind of leads to more variety. In FPS's, instead of "Doom clones", we have "Call of Duty Clones"
and "Halo clones"
To summarize, not only has Nintendo gotten a pretty big broadening demographic, but social networks, browser flash games, and smart phone games have become more accepted as gaming platforms while helping to expand the gaming demographic even further. Indie developers, who are naturally a source of major innovation, have more platforms than ever to access. Even in the AAA industry, developers are expanding into multiple genres (both retro and newborn), which leads to innovation and variety from even the big companies that don't take big risks. DLC, while it can be abused easily, offers a chance publishers to fight back against the used game system, which will result in more profitable games that can take more creative risks. Cash cows and leader following will always be around, but they aren't necessarily problems. Gaming isn't slowly dying; it's slowly improving in every area at once.