I both agree & disagree.
I agree that games don't need to be bigger. Look at Super Mario Bros. That was, what, 40kb? Yet it's the Gold Standard still used today in how characters should move in platforming-type games - how they accelerate, how they don't stop on a dime, how they can slightly adjust their direction mid-jump, variable heights of jumping, how they bounce off objects/collision detection, how platforms and enemies should be placed both to help continue and to impede, etc.
Going for more modern games, I just recently finished both Tales of Arise (the Beyond the Dawn DLC - I beat the main game ages ago) and The Legend of Heroes: Trails Beyond the Horizon (A cliffhanger?! Really?!).
Tales of Arise on PS4 is 57.20 GB, and the Beyond the Dawn DLC is an additional 36.77 GB, for a total of (give-or-take) 93.97 GB. It's...an okay game. ToA is a beautiful anime-style game with fantastic backdrops, great spell effects...but a miniscule game world and a game that puts you in the "final dungeon" around the time you'd expect the second of three acts to start. The majority of the game is running around the game world and performing menial tasks for cash & skill points. While it takes a good 80-hours-plus if you take your time to complete the full game & DLC, the content is heavily lacking. The story is good, but it ends far too fast.
(To insert another Tales of title between, let's look at Tales of Eternia, the closest other Tales game thematically to Arise - it's roughly 1.25 GB in total size, it takes 40-70 hours to complete but a good chunk of that is comprised of story beats, LOTS of locales to explore, two large full game worlds + a smaller central axis between them. The game is NOT a graphically impressive as it's a PS game instead of PS4, but the story, characters, settings, writing, music, etc. are vastly superior.)
Trails BtH comes in at 28.76 GB. The game also uses an anime aesthetic, but the detail is not quite at that level as Arise. It's still damned beautiful for a Falcom title, but it's clear that the game was made on a smaller budget. However, BtH has 4x the number of playable characters as Arise, each with their own story beats. It has a TON more music. The game world itself isn't quite as large, but a good part of the expanded world is in the "randomly generated dungeon" portion with its own story beats that directly connects to the main game. And takes roughly two-to-three-times they playtime to complete - my game clear came in at 187-hours. And that's NOT me trying to Platinum the game - that's just playing the game normally.
tl;dr: A game absolutely does not need to be bigger to be better, but it also doesn't need to be graphically superior to previous games to be superior, either. A game doesn't need to have better stories than past games, they just need competent stories (with a major hands-off approach in term of localization - localizers haven't improved a game since the PS2 era, back when improvements meant adding to a game & not censoring/cutting """objectionable""" content). Games don't need better mechanics, they just need great mechanics - even if they're 'tried & true' mechanics we've enjoyed for decades.