Square Enix producer Yoshinori Yamagishi (Star Ocean: The Last Hope) feels that game narratives have untapped potential. They're not quite there yet, but Yamagishi suggests that, in time, game stories will surpass those told in films. The problem is that "in TV, film and theatre, the creator has control over how he gives the story to the viewer - it's easier to control the emotions." The very thing that makes games a unique medium, its interactivity, is its biggest narrative hurdle.
"If we manage to get over this hurdle, then I regard video games as a greater medium to provide people with deep emotional and exciting experiences." Sadly, Yamagishi doesn't offer any ideas for doing so, but the industry has steadily improved its storytelling methods over the last several years. Heavy Rain looks to be a huge step forward, but maybe Square Enix has something of its own in the works, rather than just another generic fantasy tale.