I was talking in general about the large budget AAA games. I do see there being a reduction in the more mid-budget AAA games. I don't think that they (mid-budget AAA games) will disappear, but they will have to have a very specific focus or market. For instance, games like Dark Souls and XCOM have a specific group of players that they are making the games for. While they will not sell 20M units, publishers could feel that the can depend on sales of 2M, 3M or 5M units. Knowing that they can depend on those numbers (due to the dedicated audience) they are willing to invest in a more mid-range budget game.
As for Obsidian, I don't think we will stop making AAA games and even fairly large AAA games. But, I recognize that it has become more and more challenging for independent developers to create them due to the amount of people that need to be managed and the expectations of gamers, the press, and publishers. All of us need to look at ways to make our games better in order to make sure what we put on our name on is something we are proud of and makes our fans happy.