Cost of living.
The market is saturated. The market being saturated pushes it to be (even more) hit-oriented. 'Saturated' as in a sponge held at the bottom of a full bathtub. You can keep releasing more games but the people you want to buy them (let alone play them) aren't going to quit their second job to find the time to buy and try your weird little games.
This is not the middle. The author is talking about small games. It may be the middle of indie game development, but across the whole landscape, the "missing middle" would seem to refer to the "single-/double-A" studios/publishers/games that died out between the launch of the PS2 and the release of GTA IV.
id Software is an exception and makes a poor example to follow. Studying wild success stories is not without merit, but is -- if you are interested in how to do the thing successfully -- ultimately a trap. id was (among other things) in the right place at the right time. There is very little opportunity today for any team (let alone individual person) to push the boundaries of the technology in a meaningful way. You cannot make a game as radical and captivating as DOOM was. You will not attract players to your (now generic) platformer by getting it to run at 60Hz. You might say there was very little opportunity for any individual to do so back then as well, but then we are back at exceptions being bad examples.