Personally I would not call Immortals of Aveum an AAA game. π
And I mean, that's maybe where the problems lie. This game is all jank and all generics, with no specific thing to present except "OMG LOOK AT OUR GRAPHICS!!!!". Which are also pretty unoptimized, so you end up with:
Only a tiny tiny fraction of players can even play it.
Then, the game is utterly generic. Despite how it might look to someone not knowing about it, DOOM 2016 and Eternal are quite unique games and have a very well-designed gameplay flow that even differs divisively between the two.
The writing is horrible and would make even an MCU movie/series writer question their decisions in life.
The magic is still just guns with replaced graphics. They didn't lean into the very premise of the game at all. And all they had to do is play Lichdom Battlemage from 2014 to get some ideas and that game already struggled with the concept. But at least it pulled it off.
Can't really say I'm surprised the game flopped hard. But unlike the dev I would call the underlying idea solid, just not anything about the execution.
When a company like this catastrophically fails and Baldur's Gate 3 or Palworld do gangbusters, that signals to others who also want to make money what they should be making in order to make money. Where the money does go, like a Larian or a Pocket Pair, now has profit to spend on growing their studios and making more of what actually works. They end up hiring the talent that was let go. Not all of them; this is less efficient than if the first studio that imploded had instead made something that the market actually wanted, but this is not a situation so dire that the industry will feel it for decades like you say. New studios form all the time from mismanaged large companies that lay people off after making bad bets.