There seem to be 2 ways of looking at this.
As mentioned, you could be talking about the arcade games, too many new titles being pumped out on expensive one-off boards, at high cost to operators, not making enough money to cover costs and be able to buy more machines, that's one way to look at it. Secondly there was the home market.
When people talk about crash the most common stories which come to mind aren't the arcade ones, but the home software, the x copies of ET which went unsold.
If you look at it purely from the perspective of the games you'd probably be sat there wondering 'what crash?' There's no real discernible dip in output (of arcade games) at any point in the 80s, or 90s, sure there were some games which were rough around the edges, but there must have still been enough demand.
For the home markets, yes, there were a lot of awful games produced early on, but there were awful games produced later too, not much has changed. The whole ET situation is bizzare, because the blame for the crash often gets pinned on cheap startups wanting to make a quick buck out of games and flooding the market with crap. ET was a first party Atari game, likewise the terrible port of Pacman yet if you look over here at something like Manic Miner (1983) and Jet Set Willy (1984) they're considered classic games but were basically the only thing ever done by that developer.
At the end of the day if you pay your guys in marketing more than your developers can deliver and leave customers and retailers feeling ripped off or otherwise cheated, then yeah, you're going to end up with a lack of trust. If retailers (and publishers) were stupid enough to believe their own marketing hype, you're going to get a crash.
So over-investing, over-hyping, under-delivering and somehow actually thinking you're doing things right while being undercut by people who do give a damn about quality is a pretty good recipe for things to go boom, although the music industry still seem to be surviving somehow and they're far worse offenders in all areas?