EDIT: After some more thought, I think I'm wrong about this. There were a number of factors I didn't take into account. These factors dramatically reduce the chances of the market crashing.
I think one major factor is to do with the market's increased variety (not necessarily its overall size). Due to limited hardware back then, the types of games that could be made were also limited. The fact that PC games were capable of providing similar experience allowed for consoles to crash, as people could make a quick shift to PCs.
Mobile games, while their competition today could be comparable to PCs in the 1980's, does not provide the same outlet for most people. It does not allow a quick shift the way PCs did (Unless smartphones get a rapid increase in power, game quality, and more popularity among core gamers)
These were indeed very basic oversights. Thanks for the insults, as they were motivating to getting more reasearch done into this topic.
Here is the original, idiotic hypothesis below:
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It has been over 30 years since the market last crashed, way back in 1983. Of course, the industry has matured 1,000-fold since then. However, today in 2015, we're starting to see a lot of similarities with the 1983 crash. Let's look at those factors now:
1983: The market was bigger than it had ever been
The fledgling video game market was exploding at the time, with an annual revenue of over $3 billion (Over $7 billion when adjusted for inflation). While not directly the cause of the crash, this did cause some other factors, which shall be explained later.
2015 equivalent
The PS4 is breaking sales records, and in the US/UK, the Xbox One is also doing very well. The 3DS is a strong performer, despite stiff competition from mobile games. The market is doing quite well, indeed! However, many people are using this fact as an excuse to say it won't crash. Just remember, bubbles always grow before they burst, as what happened in 1983.
1983: Over-saturation of the market
As a direct result of this massive growth, many companies were trying to cash in on this new market. Unfortunately, many of these games from inexperienced companies were quite bad, even for their day. The problem was that pretty much anyone could make a game, or even a whole console, and start selling it for a profit. With little-to-no quality control, this flood of bad games and bad consoles led to a drop in consumer trust.
2015 equivalent
We're starting to see something similar to this flood of games from 1983. Now that Sony, Microsoft, Steam, and many other platforms allow self-publishing, this means that pretty much anyone can make and sell games, often with almost no quality control (Looking at you, Steam!). While we have reviews to seperate the good and the bad, the large number of poorly reviewed indies means that many people simply don't trust indie devs to make good games. (This is also a likely reason as to way many people dislike indies these days).
1983: Alternative platforms for video games
At around the same time consoles were exploding, so were PCs. Of course, many games were available for PC. So if the console market crashed, there was still the PC market providing plenty of games. Many people did indeed move away from consoles to PC, both before and after the crash. After all, PCs had far more functionality and usefulness beyond games, unlike consoles at the time.
2015 equivalent
It's no secret that mobile gaming is huge. Regardless of whether you like them or not, mobile games are just as just as important a market as their console/PC counterparts. If consoles crash, mobile games are likely to stay strong throughout. Primarily, because mobile games aren't as expensive, and don't require dedicated hardware just to play them. The same reasons PCs stayed strong during the 1983 crash.
1983: High-Profile flops
This is arguably what triggered the crash back in 1983. A number of highly-anticipated games turned out to be bad, and resulted in commercial flops and loss of consumer trust. The best example of this is ET for the Atari 2600, which many say is the game that caused the crash in 1983.
2015 equivalent
We haven't had any high-profile games turn out to be massive flops... yet. Instead, I'm noticing a slower trigger. We probably won't have a 21st-century equivalent of ET. But we are seeing more and more hyped games turn out to be very "meh" at times. Games like Titanfall, Watch Dogs, Destiny, The Sims 4, and Orer: 1886 are prime examples of this. In addition, while many games aren't bad in terms of gameplay or value, many people were angered when games launched essentially broken, such as Driveclub, Halo MCC, and Assassin's Creed Unity.
1983: Consumer trust was lost
This is ultimately what caused the crash. After lots of bad shovelware, and high-profile failures like ET, most consumers lost trust in video game makers. So what did they do? They stopped buying games. With no one buying games, there was not enough money to make new ones, meaning less games for people to buy. And this snowball effect continued until market revenue dropped by more than 95% in just 2 years.
2015 equivalent
As a result of many "meh" games, broken games, and a flood of DLC/microtransactions, people are indeed losing trust in publishers and developers. It's just a matter of time before we reach a tipping point.
What should we do?
Nothing. Let it crash. I think this is probably the best way to fix these problems. When the market crashed in 1983, companies that consistently spat out bad games went bankrupt. Companies realized that people actually have quality standards (who knew!?). And who rose from the ashes to save us? It was none other than Nintendo, with the NES. That "Nintendo Seal of Quality" was introduced specifically as a result of low consumer trust, to prevent another ET from happening. If not for the crash, Nintendo probably wouldn't be nearly as big as they are now.
Who will save us in after the market crashes again? I'm not a fortune teller. Probably no one will have to "save" the industry at all.
I'm not a market analyst either. So maybe it won't crash at all. But these factors lining up again makes it hard to dismiss the possibility.
"Never argue with stupid people. They will drag you down to their level and then beat you with experience."
-Samuel Clemens
