True, but this ignores the larger issue. RPG companies can't stay in business no matter what they do. Producing supplements is not cost-effective; it's no less of a development cost for a smaller niche than the core rulebooks. Producing content is not cost-effective because it's an even smaller niche. Producing endless core rulebooks or revisions thereof isn't sustainable because books stay in use for a while. Producing online material isn't sustainable because the market isn't interested. (at least not interested enough on aggregate).
No one has really cracked rpgs as a business. TSR succeeded for a while and then went bankrupt. WotC succeeded for a while, blew up things and started over, and now are already blowing things up again and are clearly not doing very well.
Rpgs are inherently problematic from a business perspective because the better people become at playing the game, and the more personally invested they are in it, the less likely they are to spend money on it. That's not going to change.
Well it is true that a business can't survive on producing RPG books alone. All of the big companies have more reliable income in addition to their RPG business. Most notably, D&D is far and away a secondary product for WotC, who makes a ton of money off of Magic: the Gathering and related card games. Likewise, most other major RPG producers are attached to companies that make their money off of other industries. An unrelated source of regular income is essential considering the cyclical nature of RPG production.
Of course, it is still plenty possible to make money off of RPGs in the long term, as long as a company pays attention to several key factors:
1) Target new players constantly.
New players (i.e. people who have never played an RPG before) are essential to keeping a product successful. That solves the "the better they are, the less they spend" problem you cited. More notably, it is the only way to
increase the overall market of a game. Not appealing to new players limits your potential market significantly.
2)Don't stay too attached to a single game.
RPGs have a life-cycle. They will only be highly profitable for a few years, and profitability will be front-loaded in the first several books. Trying to drag out a game for decades is a fool's errand. Instead, create new editions or branch out and create entirely new games to appeal to fresh audiences and reinvigorate existing fans. A developer should treat their game as a product, not a lifestyle.
3)Build up brand identity and brand loyalty.
Quality will produce brand loyalty, which can be leveraged into selling future products. Simple to say, hard to do.
4)When it would be smart, license your properties out.
If done intelligently, a company can make as much or more from licensing a property as from the original product. Strong brand identity is key to this.
It is very important to keep separate the idea of the success of a company with the life of an individual edition of a game. Just because a game has reached the end of its natural life doesn't mean the company is in bad straits. What is important is what the company does next.