I'm sure there are many of us who can remember the twist in the tale of KOTOR 1 when the truth behind Reven was found out and the mouth opening 'NO WAY!' remark that may have appeared at how well that story and it's plot twist were handled. It was very well done, it was handled in a way that had the player actually forget about Reven and get ready to face Reven's successor.

The twist wasn't expected and for that the writer's did a great job.

That was then though, back before stories were reduced to little more than 'man have gun, man go boom boom' which has become the most common form of 'story' that appears in games these days.
While graphics have become even more beautiful and detailed, stories have fallen by the way side in order to cater to the generations of gamers who demand more graphics, more guns and more killing, but less story since they are too impatient to read or listen to a story if there isn't something blowing up every few seconds.

Once in a while we might get a game that has a story, but you can usually tell that the developers got bored and just stopped bothering with a story and added more killing in so that the increasingly short attention spans of people today don't drift from the game.
Some stories are even little more than copy and paste jobs from other games.

While this might be just fine for those who only care about running around and killing anything in sight, it can make a game fairly boring if there is nothing to really draw you in outside of the usual violence.

Games like the Elder Scrolls, Mass Effects, Dragon Age, Fallouts and such will have a story, but the story may suffer in parts. Mass Effect being on such case in point recently, the story was gripping but the end felt like it had been shoved in without any connection to what had been happening in the story from the first game up to the very end, all of your choices that you made through the series really didn't make a difference.
It felt like the writers just said 'Sod it, let's copy and paste from another game'.

Now there are sometimes books of a game franchise that are supposed to add more to a game's story, but those books can be a tad hit and miss. Sometimes they might fit in just right with the franchise, but other times they feel like a loose fit.
The Fable 3 book that came out for example was a very loose fit and felt like it was more intended to follow a different branching point of the Fable series.

Writing a story based off a game franchise is a tricky thing to do when you consider that the writer and the game writers will have different ideas, which can cause the book to seem like it doesn't connect.

Maybe better writers are needed, although writers are largely undervalued in society if they don't come up with lots of CGI, explosions and guns and the usual kind of army recruitment nonsense that a lot of movies today end up feeling like - the Transformers movies being one such case in point.
With the way writers are undervalued then that can lead to writers being pretty demoralised and increasingly unwilling to write anything - something I know all too well what with being a writer and the way my work is usually passed over for some anime fan fic.

Will stories get a chance to improve in the next generation of consoles? Probably not as long as short attention spans that want the usual male lead only, guns, explosions and stale ideas time and time again continue to get their way.
Publishers are too obsessed with making fat profits and developers are expected to make the next military FPS/TPS without any regards for progress and improvements.

The future, to be honest, doesn't look good for better story telling in games and in any books made from a game's franchise. Especially as long as people are too impatient to just simply read instead of running and gunning.