Actually, the problem was not that users wouldn't buy new games, the problem is that with this way gaming companies actually have to work harder and focus on things that really make a difference: the engine, the software itself.
Before that they would just change the content, and rerelease the same thing. Rockstar did that with Grand Theft Auto 3, Vice city, and San Andreas. They were basically content mods. Yes they added new small things, but in the end it was just new content.
Now you can't do that, because soon modders will have the resources and skills to create content, and since creativity is not always directly connected to money, (and almost never with big companies) modders could end up creating better stories and content for games.
It's the same trick the musicians did in the old days: 1 hit per album, and you could only buy the song if you bought the entire album. That's why they hate iTunes, they can't do that anymore, they have to work hard on each song now.