He is right,
World Population is 7.7billion people and total 8th gen console sales to date is less than 200million.

Thats niche, and its why companies are trying to branch out to bigger things.

He wasn't comparing it to the world's population, it was just a poor attempt to show that the deal had wider implications than just the gaming division .

Maybe PC and console gaming are niche compared to mobile gaming, but they are the only ones that make possible most big games. Some big games can work well on mobile market and devices too, but while mobile market could serve well any big game, lack of dedicated gaming controls would always cripple many of them.
Anyhow, in that context Sony CEO statement had only one purpose, pushing his idea that streaming is the future of gaming, but for now, while transfer speed could already be enough, latency is still a huge obstacle for the vast majority of gamers, and solving it requires two things, one is under gamer's control, paying a more expensive internet subscription, the second is out of gamers control, unless they are ready to move to another house to achieve it, they must live in zones reached by the fastest and lowest latency data lines.

We can only go on what numbers we have before us both historically and now , yes there are variables but they work both ways, that's why we hear of player numbers mentioned that exceed the ratio of 1 person per console and because we can only estimate, so rather than pulling numbers out of the ether,the prudent course is to look at the numbers of each gen being sold, and the hardware/software revenue they've generated to give us context, and doing  that tells us that gaming is now bigger than movies and music combined and consoles are 25% of that business, so even allowing  for people using the wrong definition it doesn't look that niche.

You could say that about everything almost. There are billions of people that don't watch soccer, football, baseball, basketball. There are billions that aren't *insert specific religion*. Are these all niches?

1 Billion people watching soccer or 1 Billion people on a religion is very different than 100M people buying consoles, by the order of 10.

Sony called portable consoles niche cause the Vita failed so...

Fair point.

Numbers by themselves can mean anything but when the factors are taken into account that's when the context of the numbers begins to show the picture because really and truly if the number of platforms moved was the actual amount the industry would generate far more money than it does now. You mention music and movies but don't factor that gaming has DLC models, GAAS, microtransactions, pre-order models etc... this is what I mean by factors behind the numbers the are also factors that when people say films and music they mean mainly western films and music where most of the tracking is done they don't really factor in regions like Africa for example where Nigeria's film industry (Nollywood) generates more profit than the US (Hollywood) despite the latter being the largest in the industry even Bollywood in Asia (India) sells more than the US but that's not really tracked and the are a number of other large countries in the region that generate comparable money.

Gaming as a whole is niche that's just how it is the industry just happens to punch above its weight but it's still niche.

What would be the context of making that comparison?

Here, we are looking at the CEO of a large corporation talking to investors.  The context would be other business markets and opportunities which investors would be considering.  I already pointed out that the smartphones market dwarfs the gaming console market, as an example.  He's saying that the physical gaming console market is always going to be relatively small and thus have a limited scope in terms of potential customers.  

Let's say Sony has a home console with an installed base of 80 million after good sales over a number of years.  On the other hand, smartphone adoption is projected to top 5 billion relatively soon.  Which market has the most potential? What if we include other smart devices capable of streaming?

If the Playstation brand is doing this well in a relatively tiny market, what if the possible scope increases exponentially?  It's an argument intended to entice people to invest money.  It's no big deal and there is no reason for anyone to be offended for the sake of console gaming or to argue over the word "niche."