The Original DOOM and Wolfenstein had only a handful of guys making them. Seeing as how software development tools are far less primitive than they were twenty years ago when these games came out, I don't understand how they can spend millions developing today's games. Except for the graphics I don't see any difference in today's games, except that they just aren't as fun.
If you don't like today's games, then why did you just write about a page on it? While I will admit that badly run publishers can kill great games by under budgeting or pushing the game out the door too soon, well-run publishers produce a lot of great games that people find to be fun. If you're not having fun anymore then I'm terribly sorry to hear that, but video games today have a larger audience than ever; do you honestly think people are buying these games out of charity to the companies? They're buying them because they are having fun with them; this isn't just due to the developers but also due to the publishers.
In a way the publisher being a parent is a fairly decent analogy, just not quite right; the publisher wants you to do well so that they can benefit. I'd say it's more equivalent to the relationship between a manager and another employee; good managers want you to do well so they can benefit as well to make them look good and get the work done. Much like a manager, a publisher that doesn't put any restraint on a developer and just lets them do whatever they please they put out crap like Too Human, if they put too much restraint on a developer they get an underfunded wreck of a game. Some developers already have the proper focus to create something great others don't just like human beings; good managers are there to help their employees just like good publishers. When publishers just let developers create in a "free" environment we've generally gotten shitty games; Too Human, that X-Box game series that died after the first game came out (can't remember the name of it off the top of my head), Daikatana and others are examples of what happens when developers don't have proper focus and are basically just given money.
As to what all the money goes to in development, an awful lot of it goes to paying employees; anyone who hasn't been sleeping under a rock for the past two decades or so knows that most development teams now encompass teams of dozens of highly talented people. The increase of personnel has largely been due to the fact that computer programming has grown even more complex (note that computer software has seen a similar increase) and that most games today have more content in them. More people creating means you need more office space and generally have more overhead etc etc. Finally, marketing has also become more necessary (though the costs have mostly stayed the same compared to inflation) and those fancy new tools for development cost money to make too.
If you really don't like publishers just put your money where your mouth is (and maybe you already have, given that you claim you don't play new games because they aren't as fun) and don't buy any games put out by a publisher. Or if (as you may have just realized) most games you can play today have a publisher, then don't buy from Activision, EA, Ubisoft, Sega, Nintendo, Sony or Microsoft as those are the biggest publishers in America right now. But those of you reading this aren't going to do that, are you? You'll bitch about publishers whenever they nix a game you think you may have liked or drop a series you like, but ultimately you'll still go out and buy the best games out there. For all the supposed evil of publishers, they're funding, shipping and advertising most (if not all of) your favorite games and game series; bitch whine and moan as much as you like but in capitalism your vote is your money and an awful lot of people are voting "yes" for publishers.
Karl's version of Parkinson's Law: Work expands to exceed the time alloted it.