While I agree we will witness a contraction from the roughly 260 million consoles sold, I do not think it will be as bad as you make it out to be. I think there are whole markets in developing economies that are growing, so even a splintering or reduction in mature markets does not spell such doom and gloom.
One big thing this generation has is consoles are affordable right off the bat. I know people disagree, but $500-600 in 2005-2006 was much more than $400-500 in 2013. I think we will witness price points of $300 and $200 much sooner and mid to late generation see far more people buying systems than you expect.
My predictions
PS4 - 100-110 million
X1 - 70-80 million
Wii U - 40-50 million
Overall - 210-240 million so best case we still witness a contraction, but not terrible as all three companies can weather such a climate. Much of this estimation depends on length of this generation being 5 or 8 years long as well as who knows overall global markets. This past gen endured a near global melt down with record numbers so hard to say.
