I'm hoping to get funding to start a game development start-up, and I was wondering the same thing. I think there's plenty of room for indie game development. You can't compete with huge companies in terms of making a game that costs millions of dollars with a massive team, but there's plenty of other games to make. The game industry has gotten to a point where it takes so many years and massive amounts of money that they can scarcely try anything that's not a surefire hit, and companies get entrenched in continuing series of already popular games (instead of something new). So I think independent game developers might start to be more recognized as crucial to keeping things fresh and innovative.

Also, non-state-of-the-art games are getting more and more popular with the Wii and iPhone, while more and more people start to play games, people who don't demand hyper-realistic graphics and who want to try new ways of having fun.

To me we're still on the tip of the iceberg of game development; it has lots of potential and places to go for independent teams of hard-working, creative hackers.