This could get interesting!
As a long-time adventure gaming fan and one who has written several reviews, interviews and an article or two on the subject, I don't think they are a dying breed but maybe they are unappreciated. I play ALL genres however and consider myself a gamer and not solely an adventure gamer - so my comments aren't from some AG fan-boy.
AGs are definitely NOT dying. They just aren't one of the only genres out anymore. Back in the day, there was no such thing as an FPS and most of the other genres left something to be desired. The best graphics came from the AG sector. Now with the increased capabilities of PCs and consoles, along with the multitude of other genres, AGs no longer have the monopoly on quality - if anything they lost the quality games tag a long time ago which can partly be blamed on new genres and changing customer tastes, but mostly be blamed on some really bad game designs with puzzles that were not only unfair, but pretty stupid to be honest with you.
I do think that the mainstream press can be partly to blame here. Some of the reviews that come out have nothing to do with the game they are reviewing, but a rip on the entire genre itself. Like it or not, there are many people out there who enjoy point-and-click adventure games. Once a review starts with or includes the damning of an entire genre, you really have to ask yourself if it's fair review. Case in point, the GameSpot reviews of Scratches and Barrow Hill. Talk about a ripping. The readers reviews averaged almost twice as high with Scratches and almost 3 times as high with Barrow Hill. Heck, the Barrow Hill review seemed to be upset because the game was nothing like Silent Hill - all because both games had the word "Hill" in the title...huh? I've had one of my games (a casual Mahjong type of game) get a user opinion that ripped on it because it was nothing like a MMORPG all because my game and the MMORPG both had the name 'Rune' in the title. When I see things like that, all I can do is scratch my head. When reviewing a game, it should be reviewed on it's own merits as a stand alone product - not some reviewers idea of what they think the genre should be along with an opportunity to rip on that entire genre.
On the AG-side of things I think part of the blame can fall on the adventure gamers shoulders. There's a lot of differing opinions out there as to what makes a good AG. For a market that is relatively small compared to most other genres, to be further divided by 3rd-person vs. 1st person, realistic graphics vs. cartoon etc. can't be a good thing. There is no shortage of opinions out there and some are pretty vocal about giving it. I've gotten emails from people listing (literally!) everything they expect in an adventure game and if the game I'm developing does not contain those things - they refuse to buy it. I`m curious if RPG, RTS, or FPS developers get those same kinds of emails. Maybe that is just a normal event for developers, I dunno. Some players are really good at solving puzzles and figuring things out, while others struggle. Even there you will get radically differing opinions on a game - make it too hard and you'll be ripped by one group while praised from the other and vice-versa...
Also to blame are the developers themselves. AGs have a tendency to be very one-sided with only one solution. In other genres, the player has much more freedom to get through an area. There could be several ways of doing it and the players have the ultimate in freedom to find a solution. In AGs, you have to figure out what the developer coded in. That is the only way to solve them. The more difficult the solution, the more likely it is that the player will lose that immersion in your game and it starts to become less of an engaging experience and more of a battle vs. the developer/designer type of situation. Is it any wonder that a significant portion of Adventure Game players REFUSE to buy an AG until a walkthru comes out?
We can get into the whole technology thing, but I don't think that's the issue. AGs enjoy the ability to be 1st person slide show, 1st person 360 degree rotation, 3rd person, or full blown 3d and STILL be an adventure game. All of that comes down to what the designer feels is the best option for what they are trying to accomplish. Solo exploration/puzzle rich? 1st person. NPC/story driven? 3rd person. Ever play a puzzle driven adventure game in 3d? It sucks. All that running back and forth gets real annoying real fast. Point and click is the way to go. A few clicks and you can easily go from point A to point B. All the while your focus is on solving the puzzle, not navigating your way around.
They don't need to be high-tech and using the latest 3d technology to be enjoyed. Anyone who talks about an antiquated interface really misses the entire point of the game (and the genre!). The only real antiquated interface is text-based. Last I checked, the casual games market which is phenomenally huge is using the same game interface I was using on my C64 20 years ago...the only real difference is that the joystick has been replaced by the mouse to move the pointer around.
Last but not least are the stories themselves. If you wanted to play a game with a rich story, AGs were the genre to go to. Now nearly all of the other genres have become more story-rich, so AGs can no longer claim to be the only genre that has has them. Are they dead? No. They just aren't the only choice players have to get their gaming fix.
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