An install base is important if you are talking in terms of raw units, but it's fairly irrelevant if we are talking about sales percentages and attachment rates. The earlier systems had fewer resources put into the games, so there was more profit per title... you didn't need as large an install base because you didn't need to sell nearly as many copies. A 2600 title would have one employee working on it, maybe 2. A nes cart usually had a team of 5 to 10 in the early days, a couple of dozen or more later on. Fast-forward to today and it isn't unusual to have a team of over 200 working on a title, not including play testers and out-sourcing. I guess what I'm trying to say is I don't see the correlation you are seeing at all.
You are forgetting that in the late early 80's / late 70's video games we considered toys, there was virtually no coverage on video games like there is now (you basically had the mis-leading box art to go by, the sole reason that early nes titles used the actual pixel art and had a mandatory 3 snap shots on the back for a first few years after the crash) and kids weren't as spoiled as they are now.
Long story short you got what your parents brought home and you were thankful for it and both you and your parents were basically clueless as to what game you were getting until you actually popped it in.
And actually yes, I AM claiming that the free market system doesn't work for video games. It's a very strange market with monopolies, prices set by the manufacturers, controlled product and a counter-intuitive consumer base where there is a good chance the person who purchases a title might not be buying it for themselves. I mean you can go back and look at history, the economy rarely has an impact on the video game market or it responds contradictory to every single market out there, including other forms of media.
One of the main reasons the modern video game industry doesn't go under is BECAUSE it isn't a free market. Nintendo releases a new game. You'll pay 60 bucks for it. The free market doesn't determine this price, Nintendo does. If any store tries to sell it for less, Nintendo won't sell them any future titles, so everyone has to conform. Every single solitary publisher sets it up this way as well. Only after a certain period of time are stores allowed to discount the games and even then they may have to get permission from the publisher.
People wonder why the PC is a second class citizen when it comes to games these days, basically getting console ports and indie titles only. The reason is almost exclusively the fault of the steam sale. The market is no longer fixed and thus it can't sustain itself in a viable fashion.
You need to decide for yourself if this is a good thing or not but it has played a major factor in the downfall of pc gaming and if the big three ever stop fixing the console market, we'll see a similar fallout.