It's not necessarily an issue of quantity of game releases, but more of an issue of quality of game releases.
In the past, the figurative "bar of development" was set relatively high as you needed fairly skilled people to write the game code (where you actually had to know or learn a programming language) & design graphics as while staying within the tight constraints of the hardware of the time. HOWEVER, as technology has improved, the "development bar" has steadily dropped as various tools & game engines (like Unreal, Unity, RPG Maker, ect.) has reduced the need to know or learn a programming language in order to make a game. While lowering the bar makes it easier for some to make the game their want without having the all the technical knowledge they would have needed in the past, it also allows others to hastily cobble something that could be called a "game" & release it in order to make some quick cash on some unsuspecting customers.
On the positive side, games like Undertale (using GameMaker Studio), One Shot (using RPG Maker) & Cuphead (using Unity Engine) are just a few games that were made possible by using a game engine to provide the base framework for the developers to build on. Without those engines, the developers would need to program their games completely from scratch & effectively "reinvent the wheel" to make everything work in their own game.
However, for every indie gem out there... there can be like 10-100 pieces of "shovelware" (at a very rough estimate) that can buy such gems in the various marketplaces. It's more of this disproportional ratio of good vs bad games that can easily overwhelm the inexperienced gamers & potentially disenfranchise the seasoned, experienced gamers as well.
Digital store fronts (like GoG.com) are starting to become a bit more "curated", where the staff are selecting to add specific titles they feel are a good fit to their marketplace over some other open fronts (like Steam, which will allow anybody willing to pay the $100 / game listing fee on their platform). Game consoles have been a bit more curated on the physical side (as there's a higher cost to manufacture the game discs / cards, as well as the game cases) while being a bit more open on the digital side. However, games released on consoles have to clear the console maker's "Certification Checklist" (which is a list of requirements that every game must clear, like not having any easy-to-trigger, game-stopping bug; all control notations following specific standards & so on) before they can get onto the console.
It's been over 35 years since the video game industry experienced a market crash (back around 1983, with ET for the Atari 2600 noted as the "tipping point"), where the massive lack of quality titles caused consumers in general lose faith in new releases & stop buying games (or at least drastically reduced to number of games they purchased) altogether.
It's very possible that we may be on the verge of another industry crash, but it would more likely be limited to the PC market as the console markets are likely to be cushioned by their curation.