I don't think we'll ever have a clear picture of what's going on with RPGs at any given moment. All we can really do is take everything we learn from the current project and apply it to the next one.
I think the exact details are not very well known, but taking the long view, the idea that the RPG industry is shrinking is not particularly controversial. It's certainly not on its last legs, either. It's undergoing the slow winnowing of a hobby that can't bring in new fans fast enough to expand. There are precious few hard figures, but a while back I took the time to crunch the numbers for a bunch of estimates over a 3 years period, and comparing the figures, it looks like while everyone has success stories about individual years, folks just aren't spending as many dollars.
By contrast, I have also yet to see a single series of estimates that, over time, display growth for the RPG industry as a whole.
I think there's a tendency in RPG publishing to bury the facts behind wishful thinking and egotism.
Or, in some cases, to distort the truth to meet a deliberate strategic end. The fact that some can, for example, make claims about the industry to goad business decisions by posting on teh Intarnet is telling about the reduced scale of the hobby.
People want to believe that Vampire and Star Wars ushered in massive amounts of new gamers, because that means that D&D isn't as popular as everyone thinks and that a new game really could become a massive hit. People really want to believe that rules-light, story-centric games are just waiting to breakout and crush D&D.
There's a more complex position than that, Mike. The fewer hands in which the ultimate stewardship of RPGs as a business exist, the more volatile any problems with those stewards are going to be. It's my feeling that a broader set of influential actors is necessary to keep RPGs from suffering the same fate as comics or board wargaming.
As I've said before, the comics industry in the 90s is very instructive here. Companies were sure they'd found the things that made fans happy and provided them -- on steroids. It didn't matter to Marvel that nobody bought comics from newstands or variety stores any more and plenty of folks went on about how comics, in all their hologram-etched, foil wrapped glory, were as accessible as they ever were.
I'm sure somebody's 8 year old kid even started reading the X-Men in the 90s.
The monolithic idea of what somebody wants from a comic book trashed the comics industry.
But what's that you say? There are all these Marvel movies? What's up with that? That's because Marvel got smart and realized that the way to stay afloat in the comics biz was to get out of it. Marvel's revenue from comics books are trivial now, but even so, it's almost impossible for them to keep all of their promised titles afloat.
One sign that its comics division is small potatos is that they actually bothered to do an RPG themselves.
Anyway, what the comics biz is trying to do right now is find some way to dig themselves out of a demographic-economic pit they're in to justify themselves as being more than IP farms for ventures that actually make decent money.
(The converse is, by the way, why licensed games are what they are. RPGs are, by and large where entertainment licenses go to die. Hell, folks are excited about a game based on a book from the 50s, a movie from the 90s and a cancelled cartoon now.)
Gaming is in the same boat. WotC has given its core of consumers what they want and they've done a damn good job doing it. The genius of 3e is that it not only is a fine game, but it appeals to the (hobby-related) values of most gamers. WoTC is like an armada of X-Titles pencilled by Jim Lee -- and if you liked comics back then, you thought that was *cool.*
(That's not a backhanded quip about product WotC's product quality, either, because it is usually excellent. Lots of people really liked Lee, McFarlane and Liefield back then, and I don't think their feelings were at all illegitimate.)
But "most gamers" is also pretty small potatos, in the long run.
People really want to believe that their products are every bit as good as they think they are.
I wish that were true. I think 90% people who makes stuff want it to be evidence that they've Produced RPG Stuff about orcs, vampires and whatnot. Of the other 10%, 5% (and also, half of that 90%) don't consider making enough money to support yourself as a benchmark for the success of their business. In short, most creators have lacklustre aspirations or are not really relevant economic actors.
I'd also add one bit of personal, gaming wisdom: People want to buy fun games.
Well, that's the tricky bit. Definitions of fun come and go. I think it's a good idea to have different kinds of games with strong profiles instaed of putting everybody's eggs in one (or two or three) baskets.