....but can the industry really survive it? 

Everyone in the PS3/360 camp says the Wii U isn't poweful enough. How powerful do you expect the PS4/X3ox to be??? If Nintendo takes a loss on the so called "underpowered" Wii U, than what makes you think Sony and MS will be able to release consoles with MOAR power, and even remotely turn some sort of profit? 

The base Wii U is $299, and they profit with 1-2 games sold, so that puts the production price at around $325 (and no the GamePad doesn't eat up most of the cost). If consoles are as powerful as you people want, we could be looking at $400-$500 launch prices if they don't sell at a loss. 

Oh, and 4k will NOT happen next gen. just saying :).

Development costs are rising, and we lost a lot of devs this gen. What makes y'all think they'll survive with costs tripling? We'll just have more Call of Duty, Assassin's Creed, and Madden, and less innovation. Lightbbox Interactive, Eat Sleep Play, and Superbot Entertainment were all founded in the middle of this gen. They all released games last year that didn't sell. After that they faced major layoffs, and make iOS games now. THQ went belly up, and poor Vigil got left in the cold. Now we have publishers like EA and Square Enix consistently posting losses. If big publishers are losing money now, how will they survive next gen? 

The answer?: They WON'T

If development costs rise more next gen like Epic says, bigger publishers will have to merge, and smaller publishers will either turn to iOS development, or shut down altogether, like THQ and Atari. Everyone wants an insanely powerful PS4, but for the good of the industry, it's not necessary. 

9th generation? Gee wizz, hold your horses.

(I think you might be a little confused. We're heading into the eighth generation of home consoles. I presume this is what you meant, since you mentioned PS4, x3ox and Wii-U.  If you did indeed mean the 9th gen as in the one starting 5+ years from now, then I apologise).

I have always thought that innovation would dominate next-gen

Epic says costs will double next gen, but Ubisoft and Take-Two says they should stay about the same. Given Ubi's awesome week, I'm going with them.

Hardcore gamers need moar power, if those consoles don't deliver, it's not next-gen. Simples!

Pretty sure several publishers have said costs will stay around the same. Initial expense will be there of course of making new engines and tools but that's about it. You overestimate the expense side of things

Most of the devs that went under, did so because of the quality of the games they were making..simple as that

Nintendo takes a loss with WiiU because of the GamePad, the console itself shouldn't be much more expensive than the PS360. Afterall WiiU specs wise is not above said consoles, save for more(but slower) ram.

4K will happen next gen, PS4 gpu will have 32 ROPs, enough for 4K.

If it wasn't for the game pad thing the Wii U would cost MUCH less than it does now. The only reason it's even as expensive as it is, is due to the game pad which costs like 100$+ all by itself.

Any way to scale 4K to 2560x1440?

Wait didn't some devs like Rockstar or Take-Two say developmental costs would stay around the same?