From an article on gamerevolution.com

http://Epic%20Believes%20Development%20Costs%20Will%20Double%20Next-Gen%20http://www.gamerevolution.com/news/epic-believes-development-costs-will-double-nextgen-16039


"With a some clever work in making the process more efficient, they've been able to get the cost down to roughly double. Even still, that is a lot of money and precious time being poured into a single product. With this in mind, Sweeney went on to emphasize the rising role of free-to-play games and their ability to change the market"

So the free-to-play method may be the only solution.

I doubt it. As hardware has more potential, that doesn't mean developers are going to use all of that potential. All it does is offer more freedom for those who wish to pursue it. Games like Dust:An Elysian Tail, Braid, Super Meat Boy etc. will still be made for the newer stuff and do just as well, without having their expenses doubled.

Broken link.