As you can see, Microsoft have effectively hoisted themselves by their own petard when it comes to XBLA. In trying to manage consumers and overcome what they believed was an image issue, they have created a network that organisationally can't actually sell a lot of games. Their solution is to reduce the catalogue, but this is essentially an admission of failure on their part.
With the 360 probably having peaked in terms of overall appeal and other console providers and technology companies now delivering credible alternatives, it is up to Microsoft to rethink their whole strategy and decide whether this is a sector of the business that they really want to be in any more.