A flood of shitty games already killed the video games industry back in the Atari days. It didn't recover outside of arcades until Nintendo revived it with the NES and a part of that was a licensing system that set a standard for what games could be released.

One direction things could go to save this is curators that sort through the mess and separate the slop from the gems. And even the slop could be further broken down into "uninspired clone just chasing money" and "good game idea by someone that doesn't have the right skills or resources, so it might improve". IMO the only way this will work in the long run without getting corrupted is by making the curation a subscription service, otherwise AI "curators" that are really just marketers will dominate.

And then people will slowly realize that any game they try is a gamble with lower and lower odds of finding something good and stop spending money on games. But even then, it might not stop the slop from being generated if the costs are low.

If steam just tries to block the slop, I expect that small indie creators will end up suffering the most, especially as the AI tools improve and it gets harder and harder to tell what is produced by AI.