I think that first of all, it's not a lack of faith from developers; the numbers just don't add up for accounting. Therefore, it's not a developer excuse, it's just that whoever is in charge of finance doesn't see a good possibility of recovering their investments.
Of course there is always an install base. The 32X, Jaguar and Virtual Boy also had install bases. That doesn't mean it makes sound business sense to develop for those consoles.
His bit about not caring if there is only one person in the install base is absolutely rubbish coming from a financial standpoint. You don't just say that "Boy, console Y has an install base of 9 - the engineers who worked on it, and their wives. But you know what? I bet DOA12 would look 'HAWT' on that console, so guys, let's get to it! Quality FTW!"
From a designer/developer standpoint numbers are irrelevant, I guess. However, if Mr Hayashi would like to continue eating food instead of his shirt, he had better look into numbers or at least have someone who does that for him (which he probably does).
Bottom line is, everyone who works on a game for a living needs to see the paycheck at the end of the month, and unless you are working for a philantropist who couldn't give a rat's ass about profit and is in it just for the hell of it, everyone plays the numbers game.
Little guys can also develop games and not get squeezed out, but you have to be careful what kind of game you are developing. As an example, you can probably get away with Meteos for the PS3, make it a top-selling game, and spend little in ways of development costs (it's not like Meteos needs fancy 2048x2048 textures and motion capturing). It's the people that make Resistance- or Motostorm-type games that really need to worry about getting your money back after two-plus years of toil.
