See that's the part of the statement that is actually wrong. There certainly aren't many right now, but there are a number of "middle-market" developers, and even some publishers.minimacker said:I see what you mean. There's no middle ground. Or, rather, no middle ground developer that doesn't use a AAA publisher who bends their game to appeal to moremoneyaudiences.
Stardock is the obvious one, they develop games, but are also a low budget publisher (see Demi-God and Sins of a Solar Empire). Their games are certainly low budget affairs (the entire budget for Elemental: War of Magic (according to CEO Brad Wardell) was less than most AAA titles' Cutscene budget. Yet they're too big to be considered indie.
Middle market.
I would also consider Pandemic to be a Middle market publisher. They're relatively well known, but their games are almost entirely Niche. They don't have anything like the advertising budget of the industry giants, and their one of the last PC exclusive Publishers. What ever else you can say about them, games like Europa Universalis, Crusader Kings, even Mount and Blade (after the first, since that was obviously indie) have way too much financial backing to be indie, but are two restricted in audience/budget to be AAA.
Middle market
I actually see the number of Middle market developers and publishers increasing in the near future. As things stand, there are a lot of games that just can't be made because they fall into this middle Void: They cost to much time and money to make for indie groups to make, but they are too niche for big AAA studios to make enough money on.
The beautiful thing about the market, though, is that if there is a demand for something, Someone will eventually make it. It might be new start-up companies that are created to fill this void, or some of the AAA studios might create off-shoot studios with fewer people and lower budgets to capitalize on this gap.
And there is certainly demand for it. The types of games that would make up the middle market, those are the types of games the AAA studios USED to make. Back when the popularity of Video games was already a niched playing field studios had to make games for specific niches, otherwise they couldn't sell enough. That isn't the case anymore, but the demand for those types of games hasn't diminished.
I don't know who they will be, but I strongly expect the middle market to see some considerable growth in the next few years.