I don't think that's true at all. Nothing else Paradox publishes has AAA graphics, and that's not the target audience for their games. The first Cities Skylines didn't beat Sim City because it had better graphics. It was because of gameplay. Since EA gave up on city sims, they don't even have peers, they're only competing with themselves.
>and that's not the target audience for their games.
nor was it for Baldur's Gate. But studios are constantly seeking to try and expand their audience, so graphics are an inevitable first impression.
And of course, They need to show that this sequel is a deserved step up instead of staying in CS1. if it just looked like CS1 but with more plugins, that might not draw enough people away from 1.