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.
"Never argue with stupid people. They will drag you down to their level and then beat you with experience."
-Samuel Clemens
