That stands to reason. Whatever games the people who stay make will continually fall into this cycle unless there is a fundamental change to the way games are developed. As you pointed out there will be tons of lost knowledge, and games will get worse every cycle. Companies don’t want to pay to develop things they just want to buy profitable companies once someone has done the hard work and it’s simply not sustainable.
The sub is great for their bottom line. The current state of the game is selling carries for everything from pvp, ranked, raids, dungeons, even leveling. To fund these legal in game purchases blizz will sell you gold for money. They also introduced a cosmetic store with in game currency which you earn by keeping the sub active. Then finally they have their normal store of mounts and pets for cash.
They haven’t cared about their reputation since they went public and few years ago. Everything is profit first for them.