It does seem like a big deal. I mean, last year there nominations titled "If You Were a Dinosaur, My Love", which was an unusual choice for both a Nebula (a different SF/F award, chosen by a jury) and a Hugo nomination. The genre is floundering fairly hard.
How about the actual Hugo short story winner, "The Water That Falls on You from Nowhere"? John Chu may be a talented writer, but that story was NOT a science fiction story. It was a cliched story about a guy bringing home a partner that his family didn't approve of, with a silly "you get wet when you lie" bit tossed in at the beginning to somehow qualify it for the Hugo with a mild fantasy element.
It was another "Guess Who's Coming to Dinner" plot retread, only this time the "Who" was gay. So what? It was still a story we've all heard or seen a hundred times in the past 30 years - just substitute your race / religion / ethnicity of choice. What makes this one memorable, besides the sexuality of the main characters?
I cannot believe there wasn't a better science fiction short story published in 2013 than Chu's story. It's not the genre that's floundering, it's what the people who are running the Hugo consider to be "worthy" that has plummeted.