Nintendo predicted this problem during the PS2/Gamecube/Xbox days.
Back when all games could render where red squares and blue squiggles art was an extremely limiting factor. So we started building bigger, faster, better machines so we could support more colors and higher resolutions.
Eventually we went to 3D and pre-rendered movies. Suddenly art budgets became more expensive than game design. That's when trouble began. Instead of making several games that look "good enough" to get the gameplay across, companies are obsessed with having the best graphics. We're reaching the asymptote where doubling the art budget does not double the presentation. Where adding nosehair textures does not improve immersion enough to justify its costs.
Last gen, a lot of middle-level developers like Tatio and Hudson couldn't deal with art costs (even though they still have great game ideas) and have been bought out. So now we're left with the big boys, who are vastly less likely to spend money on new game ideas, but will burn cash on super-mega high res graphics.
Nintendo asked developers last gen and basically got "yes, graphics are good enough now." So Nintendo decided to not pump up the graphics too much and instead tried to think up new ways of gameplay. Hence the Wiimote.
There is no such thing as a console war. This is the first step to game design.
