PlayStation has a library of 2,418 games and PS2 had 3870 games. It took $5-$10 million to develop a PS2 game versus $0.8 million-$1.7 million for the original PlayStation [source: sciencedirect] . In June 2009 Ubisoft reiterated that major titles for PS3/X360 cost $20-$30 million to make and that games for the next-generation may exceed $60 million [source:edge-online].
It is common sense that there is a direct correlation between game costs and games made. It cost 2.5 times as much to make a PS3 game than a PS2 on average. Similarly we can see the consequence of this reflected in the graphs below since 4 times less games have been made for PS3 than PS2.
If it will cost twice as much to make a PS4 game than a PS3 according to Ubisoft, then following the same logic I expect about 2 times less PS4 games to be made than PS3, here is why (based on extrapolation), though other factors such as install base is considered.
Worrying trend? Rainbow Six Vegas for example has this budget breakdown: 30% - Programming. 20% - Art. 15% - Design. 10% - Marketing. 8% - Testing. 7% - Sound. 7% - Animation. 2% - Management. 1% - Other. This gen art, design & animation will cost much more
One certainty though is that the higher the install base the more the games will be made and then development cost becomes less relevant. Which is evident with the PS1 vs PS2. So even with higher development costs for PS2 than PS1, still more PS2 games were made since 50 million more PS2's were sold. Hence Sony can solve this potential problem by selling more PS4's, but i doubt the PS4 will sell that much higher than the PS2.
To conclude, if the PS4 does have only 400 games. Gamers must ask themselves, is better graphics worth it...in exchange for less games? One may say quality over quantity, but there is also evidence that even the length it takes to complete games is decreasing as well, they are becoming shorter (I will leave that for another post).