When it comes down to it it's all about how you adapt to the situation, just like any business (unless it's regulated) you have to give people a reason to play your game and a reason to talk about it, those are the most important things you can provide your audience. It doesn't really matter how much time and money you put into a game if you can't convince people that your game is what they want, this can be achieved by pushing genres, innovate, perfect, utilize an underserved genre or having a great style/tone because those are marketable things. You have to always stay on top to survive in the "free market". If you make a thing that most people either don't have a reason to be excited about or if they can get something equal or better somewhere else, you're out.
And this is not just the games industry, music, film and books are in the same situation, anyone can pick up and guitar and a cheap mic and play music or make videos/short-films on youtube, write a novel and put it up onto Amazon. If something is worth paying for, people will pay, the race to the bottom mostly apply to games that are mediocre or similar to other games where the price matter more than the product, it's probably the only thing that matters because why pay when you can get something similar that's better and free/cheaper?, if you have a solid game that's good, on-top and marketable you can definitally charge a decent amount of money for it. Ruskul made a good point about this, look at the developers that put not just their soul and heart into it but they are all very competent designers and they all have distinct, marketable visuals and style/tone.
That said, "make it good and they will come" is not really true either even though that's the impression you might get, I think that statement is vague and not particularly applicable because what is good differs and sometimes having a mediocre game that is amazingly marketable will break through and sometimes it's the other way around but the point is don't settle for mediocrity, strive for marketability and like I said above give people a reason to play and talk.
That's my experience from reading and talking to people about these things so take what I said with a grain of salt.
I saw this image on twitter the other day, thought it'd lighten up the mood a little as I found it pretty funny: