I disagree. The linked video is more about the real "advantages" for the existence of micro-transactions than any proof of sinking production costs. I am pretty sure it's getting more expensive to make successful video games each year. Looking at the NPD sales data for 2018, for example, I only see expensive big budget productions and no Hellblade/Senua-budget games at the top. The market rewards high production value and the publishers react to that. That's an upward spiral that will continue.
Cuphead has sold approx. 3 Mio units worldwide and that's a huge exception. Nearly no low-budget title comes near one tenth of that mark. FIFA 18 has sold 24 Mio units, GTA 5 90 Mio. units, etc... we're talking a different league here. The customer's decision, not mine.
The video argues that that's what the developers chose, to make bigger more expensive AAA-games, rather than smaller B-games. And honestly, to me, that seems more logical.
Yeah. FIFA sells a lot. But are we seriously going to argue that a yearly FIFA refresh costs as much as GTA5...? Hellblade probably costs more to make than a FIFA refresh (if not multiple).
You say that market rewards high production value, but, I don't think it works that way. Look at this list;
https://en.wikipedia.org/wiki/List_of_most_expensive_video_games_to_develop
A few of the most important ones are...;
COD MW2, the second most expensive game yet, had 250 million USD in total cost... But look at the development cost. 50 million. The other 200 million was marketing. It's actually a low production value game, and is one of the most popular games ever.
The most expensive is GTA V, with 265 million, about half being development, and the other half marketing.
Now here's an interesting one. The third most expensive, BioWare's Star Wars The Old Republic. 200+ million. Did that game become a huge success like the two above? No. So... No reward based on high production value.
Take the top 10 most expensive games, based on total amount. There is ONE game of 2018 (Shadow of the Tomb Raider) or later in the top 10. The rest are all between 2008 and 2014.
If we take it based on solely game development cost, it's that same recent game (Shadow of the Tomb Raider) that's in the top 10, and the next most recent one is from 2015 (Metal Gear Solid V: The Phantom Pain) and the next one from 2014 (Watch Dogs).
Now sure, the list is not complete. BUT, the list only has games that cost more than $50 million dollars. And there is one game from 2018, and one game from 2017, no games from 2016, two games for both 2015 and 2014, and a bunch of games of 2013 and 2011. There's quite the trend here... In the early 2010s development costs were quite high... Higher than today. And it becomes even funnier, when Halo 2 cost more to develop in 2004 than Destiny in 2014... So really. I'm not seeing how games are becoming more expensive to make, to justify all the trash they put in them.
We can also take Mass Effect as an example. Mass Effect Andromeda is on that list, the other three aren't. Now, before one says that the latest was more expensive to make, read up on the development issues to see that this was no normal development, and a lot of resources were wasted, but I digress. My point is that, the other Mass Effect games were more heavily rewarded, despite being much smaller budget games. So yeah, the idea that the market rewards high production value is false. The market values good games.
The issue is that publishers want to force an attraction to larger and larger audiences, rather than letting it happen naturally with their good games. That's why they try and stir things up by trying to please feminists, LGBTQs, any SJWs basically. They want them on board, even though those people are never really going to appreciate gaming like gamers do. Incorporating all these things in games takes additional resources, and so does advertising for them. DOA6 went in this same direction, trying to appeal to feminists with their "we're not sexy anymore" statements, basically making a part of their real fan base worried. Yeah. Of course cost is going up if you're trying to include this sh!t everywhere and alienating your own audience at the same time, and thus releasing unfinished games. You'll have to put additional resources for months if not years afterwards. If you actually make a good product from the start, we don't have this issue and everyone's happy. But nah... They prefer to push generic games that even your pet at home should be able to play to try and sell more...