The problem with innovation in gaming is that gaming is incredibly nostalgia-driven. Look at movies for a second: new movies with special effects that would've been impossible when we were kids (let's assume we're all mid-twenties) are well received because movies only take up two-hour chunks of our lives. Sure, we all have our old childhood favorites, but they don't really define who we are. We can sit down and enjoy The Dark Knight just as much as we did Batman Forever when we were young.
You can't do that with games. As kids, we put hundreds of hours into Zeldas and Final Fantasies and Marios and Sonics and Pokemons and the like. Those games were hugely defining of our experiences in the genre. We all pine for innovation in public forums, but secretly, most of us just want to play prettier versions of our childhood favorites over and over again. Look at how many times Ocarina of Time has been sold and resold and resold to an amazing reception.
Innovative games clash with our hardwired expectations of gaming, which is why, no, games are not a good environment for innovation, when the target audience is used to previous generations. I think innovation can be successful within the medium when it defines the gaming experience for new generations. For example, FFXIII could very well be the quintessential RPG experience for today's children.
And there's nothing wrong with that. That's why I hate when new parents on reddit are so proud of starting their kids out "the right way" with gaming on their childhood favorites. It's innocuous indoctrination, sure, but it's indoctrination nonetheless. It hurts the reception of innovation because we're raising the next generation with the same "things ain't what they used to be" mindset on which so many of us were raised.
Long story short, I think innovation does not currently work well in the video game industry, but I don't think it's the video game industry's fault. I think it's the players' fault for being generally closed-minded about new experiences that clash with what they know and love.