One of the things I find the most interesting about this article is the comment of how this has changed in the last 18 months. Wait, so smaller-scale or less expensively produced games were profitable before, but now they're not?
Clearly that's not the case, so I think the real issue here is that most of these producers tend to calculate the profitability of a game the same way Hollywood does. Case in point:
http://www.slashfilm.com/2010/07/06/insane-studio-accounting-warner-bros-claims-167-million-loss-over-harry-potter-and-the-order-of-the-phoenix/
What it comes down to is that for a company like Ubisoft, even if they make a game for less then one million and it makes 8 digits in revenue, like Galactic Civilizations II did for Stardock, it's just not enough money to interest them.
And when they make a game that has a budget approaching the 100 million mark, to them it's not going to be 'profitable' unless it breaks the half a billion level. So they'd rather bank it all on trying to make the big bucks using supposedly proven franchises rather then waste time and resources on developing on smaller scale products that won't excite investors or the Board of Directors.