I would assume this would come into play for some PS4 owners, but the early adopter crowd is likely to buy the new hardware as long as it's a reasonable price. $499 probably being the limit in terms of making it as accessible for as many as possible. This crowd has got to be 5-10 million or more. If PS4 and Pro are going to continue to exist because they are still being catered to, mostly by third party, then PS doesn't need to worry about the transition time. As long as they aren't losing a worrisome amount of existing PS4 owners to Switch or Lockhart/Anaconda, then PS can just continue to profit off PS4. If the PS5 is $499, the longer the transition takes, the more time they have to get the price down. It will change from having to have a PS5 for certain games, to buying a PS5 because the price has finally reached a point that makes sense to jump on board, plus some first party exclusives built up by then.

The other way to look at it, is that if MS has XB1S, XB1SAD, 'XB2L', 'XB2A', for PS to fully transition to PS5 and leave PS4 behind for the most part would be a huge gamble, and would likely turn out poorly for them. If you're an early adopter, but not all that wealthy and not a fan of any brand, are you going to buy a $499 PS5/'XB2A', or a $349 'XB2L'? Once a brand transition is made, it's likely that gamer is staying in that ecosystem for the duration of the gen, if not longer. PS in some ways can't afford to fully transition to next gen quickly. 

PS5 may very well end up a little bit like the PS2 to PS3 transition. Probably not quite as slow, and not a mile behind XB, trying to catch up again.

No.  It's the same thing we have had happen for generations.  The old is cheap enough for budget gamers, while the new is for those who want more powerful HW, which will obviously be more expensive.  If the early adopters already have had the PS4 for 6-7 years when the PS5 launches, they don't need another PS4.  They are going to want the newer, more powerful HW, even if they mainly have the same library of cross-gen games for the first 1-2 years of the PS5's lifetime.

This. First two years of the PS4/Xbox One gen had almost exclusively games being ported to current and last gen, with a few actual next gen only console games made by devs owned by either Sony or Microsoft respectively.

I remember the PS4 in particular having a dearth of quality first party games (Infamous and Killzone were so meh they ended any future plans for each series. Driveclub was either fantastic or terrible depending on who you spoke with. The Order 1886 was legendarily disappointing. Bloodborne was the only genuinely excellent first party game.) Granted, I highly doubt Sony will have the same issue this time around.

Taking back this comment. Here's the new one:

"I'm the Whiz. And nobody beats me!"