Westerns are sadly kind of a harsh genre to do. Many people already have touched upon some of the key reasons you are not going to see a lot of good western games.
It is a bit of a sour spot for some people. WWII, WWI, modern warfare games... there may be a lot of mud to sling around against any of the participants but it is easier to create a narrative. Medieval games, that was over a thousand years ago and except for a few extremists or ardent history fans, we do not really do not see people still broiling over the formation of the Holy Roman Empire or the break up of it during the 30 years war.
There are still people who are still angry over what happened during the American western expansion though. The US did some pretty disgusting things in the eyes of some people.
Should they still be angry after a century? Maybe, maybe not. Not my place to say.
But it would be like playing a game where you are playing as British Colonial soldiers during the Anglo-Zulu and Boer Wars of the late 1800's. Doable, would allow for the body counts that players expect in video games but MIGHT cause a bit of a stir with some people when the read it.
So if you are doing a western game these days in our overly sensitive, do not offend anyone anywhere ever atmosphere... you are left with, lets see, can't offend the native americans or portray them in any stereotypical way, which will be difficult since most games are developed overseas and farmed out to lowest bidder writers, artists, and programmers, we can't offend the mexicans... they were a substantial presence in this modern time and they make up a significant and potential loud group of protesters these days.
So that leaves, a game where your lone hero shoots only bandits, corrupt business men (might be a sour spot there), and corrupt military officers. Yeah, you can do that but after awhile, it is hard to differentiate one dry dusty boom town from the next one in such a rather stark and boring landscape or yet another dusty cave at the end of a box canyon that the villains have been chased into.
The west lacks certain things that really are visually interesting. WWI, you have the dark and inhuman terror that is the trenches of the western front. WWII, you have anything from the iconic Normandy beaches to fighter duels in the skies, fleets of warships, vast plains, verdant forests, mountains, and any vista in between to tell pretty much any story you want in any climate you want... including castles. Fantasy or medieval historical, well... see WWII without the tanks and planes.
The west just does not have those. Take away anything potentially offensive and you are left with not too much to really work with unless you want to focus on a survival aspect. Sure, we could go and try to give a heavy drama or story based game about revenge or what ever character motivation but lets be honest here...
Most game writers are terrible. They tend not to be able to write a compelling story if you held a gun to their family's head or for a million dollars. So a heavy drama based western (or most games in general) will probably end up poorly written, cliche as hell, and ultimately dull.
This is all assuming that we are going to see yet another John Wayne/Clint Eastwood/spaghetti western style setting but the era could be interesting if it would just be moved out of the stereotypical dust filled western boom town...
but then we would be leaving the whole 'six shooter/lawless land where only the lone hero with a tin star brings justice to a broken area' aspect behind. Which is sadly kind of the focus of a typical 'western' setting.
It is bad mythology and honestly should be ignored for it's own good.
