Well, there's a bit of a stigma against video games in general, so even if someone actually did create something on par with
The Lord of the Rings (which is a bit of an unfair comparison, considering that the backstory and worldbuilding was the whole
point for Tolkien, and the possibility of telling stories there came afterward) it wouldn't be considered as good by the vast majority of people simply due to their own biases.
The games' stories themselves... well, that varies. Arena is very much generic "pick up pieces of plot device, use it to kill villain" and Oblivion is a little more original but not very much; Daggerfall and Morrowind at least have reasonably complex plots with interesting characters, but in the end they also suffer quite a bit from the requirements of the genre - they both have a
lot of "fetch quests" in exchange for information as part of the main storyline, after all, which would be jarring and odd to have so often in a literary context, and neither of them can have the other characters doing much of anything (Daggerfall's NPCs are almost completely static) so the player character ends up doing way too much to work for a proper storyline.*
Some of the in-game literature - http://www.imperial-library.info/content/daggerfall-king-edward or http://www.imperial-library.info/content/daggerfall-real-barenziah or http://www.imperial-library.info/content/morrowind-thirty-six-lessons-vivec - are all fairly good just on their own, or at least I enjoy just sitting down and reading them sometimes, though a physical book form would help since reading off a computer screen can be very annoying for me. <_< Their length makes it so the first two can't develop their characters or plot as much as would be good, however, and the last one is less a novella and more a fictional holy book, which is fun enough to read for me but certainly wouldn't catch the interest of a lot of other people. The games' backstory and history are quite well thought-out, though of course it's still relatively rudimentary and a lot of it still falls into the generic fantasy mould that would make it hard for it to stand out in the end. I haven't read the published books (or, well, right now, book) but while by all accounts they're fairly decent I doubt they'll ever be considered classics of fantasy literature either.
*With the exception of Daggerfall, actually, where you can have it so that one of a certain set of NPCs can perform a vital task in the story themselves. It's one of my favourite moments, particularly due to the details of the event which of course I won't spoil here.