Traditional publishers trembling? That would seem unlikely to me given that one of the legends of the game development community only managed to raise a budget equivalent to an average XBLA game.
Second... if you don't try to pace the AAA games on graphics quality or the other de rigeur time and money sinks that add disproportionately little to the final experience, you can do a lot with that amount of money.
He was talking about budget, not profits. I don't know about average but I wouldn't be surprised if quite a bit of XBLA/PSN (not XBLIG) are made at around that budget point (AAA games on the other hand commonly have budgets in the 10s of millions, some ever more).
Second... if you don't try to pace the AAA games on graphics quality or the other de rigeur time and money sinks that add disproportionately little to the final experience, you can do a lot with that amount of money.