As an example, imagine a publisher offers you to create a new project for them. They'll pay you a shit-ton of money if you can finish it to a given release date. You'll probably go in like "i'll do it!" without even re-evaluating the situation. Say it's a small indie game, a 6-man project over the time of 2 years. Then shit hits the fan. 2 of your 6-man team is ill, you'll be behind schedule, you cannot just add two more men to your team because you'd have to introduce them to the project and they'll probably never know it as good as the employees that are sick atm. Your team is put under more pressure. You cannot just tell the publisher you'll need more time, that's not gonna work. So you work all day and night, you try to work faster, this is less clean and increases the risk of implementing bugs. This goes deeper and deeper and hopefully will stop before you suffer serious health issues due to your work.

This is true.

Often it's not even the developers fault, it's the higher ups (in other words the ones that pay the devs).

This is not.

Managing a project correctly is part of the developer's job. You need to budget time appropriately, allow leeway for potential issues (which will happen - optimism is the bane of projects), and create a realistic plan for your team to follow. If a developer gets an offer from a publisher and straight up says "Oh yeah, we can fit 100% of these features inside a ridiculously short dev cycle." that's really on them for agreeing to it.

Taken out of the video game context, let's say you hired a construction firm to build you a house for $300k and you wanted it done in six months, and the firm went "Sure, we can do that!" After the time was up, if the house was half complete and the firm asked for another $300k and six months to finish it, is that your fault or did they just give you a bad estimate?

The comparison to the service industry isn't a good one because developers aren't paid in tips. Development, especially the kind not done in-house, is a contract job. If you sign a contract with explicit conditions to deliver and you fuck it up, it's not the buyer's fault.

The problem is a lot of development houses - especially small, independent ones - are headed up by artistic, passionate people who want to make dream projects. Artists are rather notorious for being idealistic and impractical, though. We can see with Kickstarter that, even freed from the reigns of the "big bad publisher," there's a pretty high chance of developers promising the moon and getting themselves in over their heads. It's an issue when you have passionate folks who never learned to "kill their darlings."