There are so many threats to the gaming industry, it's hard to know where to start. First off, as graphics get better, it becomes more about the shine of the game, rather than the core of the game. Take a look at FF13: it looked good, but it played like a rail-shooter and didn't let you go much of anywhere. On the flipside, sandbox games give you freedom, but they rarely give you any reason to play the game.
Next, as games become increasingly more expensive to create, developers become more reluctant to go outside the box, which hurts in more ways than one. They see something that works, and then milk that cash cow, ensuring that the game will earn them some cash. As a result, when something innovative DOES come out, customers are very likely to brush it off as gimmicky or if it is successful, the developers will immediately jump on the new gravy train, ruining the spark of originality the game has with a slew of games just like it.
Parents are another problem in this perfect storm. It's much easier for parents to blame problems their 'perfect child' has or causes on the FPS they bought for Jeremy, rather than themselves for not actually being in their child's life and actually parenting. It's like the oft-said argument for guns: "Guns don't kill people, people kill people." They need to have the common sense to realize how mature their child is, buy games appropriately based on that, and play a bit of the game themselves to see what it's like.
Finally, the government is going a bit too far in controlling who buys what games, among other things. I can see that they want to 'protect the youth' from games that can be too violent at times, but they're going about it the wrong way. If someone's old enough to drive and work, they are old enough to purchase any non-erotic game. It's their money, so let them spend it how they want. Furthermore, the government is well-known for being the worst group to handle anything as big as this, and it's another way that they can get their hands on another business. I don't want them to be hands-off, but at the same time, they don't need to get too entangled in this.
There's more on this, but I believe I covered the main points.