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Hollywood doesn't make good video game movies for the same reason General Motors doesn't make motorized unicycles: they're stupid ideas, there's very little money in it and they aren't very good at making their regular product to begin with. They're not adapting the license to tell the epic story on the cinematic field of wonder--they're doing it because they are literally out of ideas.
For whatever reason, video games and movies don't play well together. Every so often, someone with dollar signs in their eyes will try to make a movie based on a video game franchise, only to run into this unscalable wall: Video Game Movies Suck.
It's kind of hard to say why. Some would say that video games are essentially just movies that have showmanship sacrificed in favor of control, so sacrificing the control leaves you with a bad movie. Others would say that video game plots are just bad, existing just to give the player an Excuse Plot to go out and fight things. Maybe directors just invariably pick the wrong games -- after all, if the game itself is bad, then it's not surprising if its adaptation is bad too.
The reality? Well, it tends to vary -- Platformers tend to not have enough plot within the games themselves (maybe a three-paragraph setup in the manual and a two-minute ending), so the writers need to improvise. The average First-Person Shooter has a few minutes of narrative cinematics, but even the more cerebral examples of the genre will, by definition, feature hours of plot-free gunplay to rival the dumbest Summer Blockbuster. Fighting Games tend to have a similarly flimsy plot with Multiple Endings depending on the player's character, and the writers have to mishmash these various plot threads into a coherent whole. The only video game genres that pay much attention to plot -- RPGs and Adventure Games -- tend to have far too much plot to squeeze into a two-hour flick without leaving a ton out.
On the other side of the adaptation equation, blame can also be pinned on the studios and directors who put out these films. The generation that grew up and has grown up playing video games has yet to produce a whole lot of filmmakers. As a result, the vast majority of people in the film industry aren't really all that familiar with video games, including the ones they are tasked with putting on film. Thus, filmmakers don't really know how to adapt the games effectively; even if they choose a good game with a good plot that's not too hard to adapt, they probably aren't going to understand just what makes the game so appealing to people anyway. One cannot distill the core taste if one does not know what the taste actually is. Indeed, this medium ignorance, aside from resulting in bad game adaptations, is also the direct cause of Pac-Man Fever. The situation is similar to what was the case with superhero movies and shows: poor understanding of the comics led to poor adaptations, until the people who actually grew up reading the comics got good standing in the movie business and helped drive the current train of decent-at-the-least superhero films.
So far, no one's nominating video game movies for Oscars. If you hear new, exciting rumors about an upcoming film (like the rumored John Woo-directed Metroid movie), tread carefully, or you may be crushed beneath the Descending Ceiling of bad writing.
Often (although less universally) the inverse is also true, of course, which is The Problem with Licensed Games.
For some reasons (such as less risk-taking/far-fetched plot than other genres or a high immunity to Gameplay and Story Segregation effect), Dating Sim movies -- rare as they may be -- seem exempt from this trope, although as with anything, there are exceptions. Animated adaptations of video games also tend to be received more favorably than their live-action counterparts, perhaps because the medium is just better suited for the kinds of stories that are told in most video games. Also, the fact that animated movies are produced in a similar method to video game cutscenes helps that they can - at the very least - have the merit of being visually faithful to the source material.