In my mind, there is a spectrum of sequels, from those adhering strictly to the previous formula to those taking chances and making fundamental changes. The former seems to be the more common type. In a series like Rock Band and Guitar Hero, this can be a huge problem. With multiple entries in each series per year, the changes between the games are sometimes so minute that it is hard to justify the upgrade. Harmonix, the studio behind Rock Band, was recently sold by MTV for $50. Of course, a large amount of debt in the form of unsold product was also part of the bargain, but this was a hugely successful studio that made some of the most popular games in the past decade.
In a game series with a strong story, such as Metal Gear Solid or Uncharted, a fresh story and some more time with the characters and universe can be enough for success. Notice though that sequels in both series do have changes that make them different experiences from more than just a story standpoint.
So in today's world, where Activision can pump out a new Call of Duty every year, utilizing two (and soon even more) different development studios, we have to ask ourselves: What justifies a sequel? People have begun complaining that Call of Duty is largely identical each year, and the short-term fate of the music-rhythm genre has illustrated the fact that people can only take so much incremental change. Right now, Call of Duty is at the top of its game, but so too were Rock Band and Guitar Hero a few years ago.
At the same time, indie studios and even big developers are creating new franchises that provide a breath of fresh air for the industry. Sequels can be a great thing. They serve to invest fans even further in the universe of the game and they allow developers to use previous engines and tools and focus on mechanics and polish to make the game shine. However, developers and publishers must be aware that too much of a good thing can be overwhelming.