I think technological limitations play a part as well; there's only so much you can manage with DX9. DX10 was never truly adopted, with the majority of the users avoiding Vista. Now that Win7 is being better received, we'll probably see a push for new limits once DX11 hardware is more widespread.
But yeah, with a larger focus on consoles and every company moaning about ridiculously exaggerated piracy numbers, it slowed down a little.
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