Yes. There are discounted used games, and free indie games. The market says if you can get a substitute good for a lot less, you might go with it.
When there was nothing that compared to Super Mario Bros 1, people were willing to pay 50$ for it. If Super Mario Bros 1 debuted in 2011, it wouldn't make as much money as it did in 1985. People expect more now for less money. It is just how the market works.
I'm a video game developer myself, and I don't see anything wrong with this. I think it is a good thing. If all the games from 5+ years are available for free, the only thing people would buy would be sequels(games with more scope), or new and creative things. If the market saturates, it makes developers have to get more creative to find new genres and such.