Now that I think about it, I dont see why gaming can't grow big enough to sell so many gaming consoles. I know it sounds crazy but with each gen growing, it doesn't sound impossible. Smartphones may become a threat to handhelds but not much to home consoles. If gaming continues to grow at the rate it has been, how much do you think the next gen will sell?

Optimistically, this generation should end up at 120m Wiis, 105m per HD console, 160m DSs and 80m PSPs. That adds up to 570m.
But let's take it further. Had everything gone right for everyone this generation (PS3 launch goes well, RROD doesn't happen, Wii gets third party support, Wii/DS aren't left to die, etc.), we'd be looking at, say, 160m for Wii/PS3, 135m for 360, 195m for DS and 100m for PSP in order to get 750m. So, sure, why not? Seems plausible enough.

the thing you are forgetting is that high sales of one console directly correlates with low sales of another. Had Sony launched its console with a good library and a decent price, the 360 would have never become so popular. Had the RROD not tarnished the 360, the PS3 would have never been able to catch up when the 360 was unarguably the better choice both cost wise and game library wise. Had wii support not gone to hell so quickly, ps3/360 would have never got big boosts in sales 2010-2011, etc.

Personally I think this will end up being the biggest gen, in terms of "dedicated" gaming consoles and handhelds. I don't even think new dedicated gaming devices will even exist in 15 years. 

Not necessarily. In effect, this generation showed just the opposite; it was thanks to the combined sales of the HD consoles that each one of them received considerably more third party support than the Wii since, combined, they make for a big userbase. With a big combined userbase for all consoles, there would be less of a risk, leading to all third parties making more games. Well, probably.

Of course, what you say happens in a lot of cases since the consoles are competing for more or less the same users, but there's enough room for a situation to occur where most people end up buying several consoles and more people end up buying consoles in general, leading to the overlapping audience effect being negated.

Hypothetically, if the three consoles were more similar in power, then third parties may have made all games completely multiplatform. All platforms could also be cheaper/weaker than the HD consoles, but more expensive than the Wii, at say $349 at launch with a slight loss. At this point, people would buy Wiis for first party content, PS3s for the brand name and 360s for the online. It's a bit unlikely, obviously, but plausible.

And, while I, too, feel that this generation has pushed the boundaries, let's not make any rash predictions about dedicated gaming consoles, lest we forgot that people have been saying the same thing at the end of every generation.

500 million is a far more realistic total for all the consoles and portables sold in one generation.
Wii + 360 + PS3 + DS + PSP have sold around 400 million this generation combined.

500 million equates to a 25% increase upon this generation's total of 400 million.

Have they though, because I have never heard of a lot of people making such a prediction until this gen. Consoles and handheld have already become basically multimedia boxes instead of dedicated machines. The playstation 3 and xbox 360 might as well be closed pcs considering all the none gaming features they include. It really isn't hard to believe gaming will just be one of the many features of future setboxes. Infact that basically already happened this generation. Future phones, and heck even current phones will have physical control attachments. Handhelds that get updated every 6-7 years can't compete with phones that get updated yearly. Within a year phones will be much much more powerful than the vita and 3ds. The only problem phones currently face is that the consumer has gotten used to free to play and 1$ games, but that is already changing with many full fledged games being ported on phones for $5-$20.

Yeah but it's not like anyone can actually take advantage of the power of the latest phone for games because then you cut out a huge install base from last year.  Only updating every 6-7 years ensures a massive game library and comparability with all the latest features for this 6-7 years.  This is why nothing changes but size for the handhelds

I don't believe so unless China allows consoles to come there. One reason this generation has sold so well is because the generation lasted longer so a lot of over-lapping consumers. I usually do buy every console but a lot of people in the past would only buy 1 console and stick with it. This generation has been very different than previous ones

Gen 4: roughly 160 million consoles sold (minus GBC)

Gen5: roughly 208 million consoles sold (adding GBC)

Gen6: roughly 300 million consoles sold

Gen7: so far 450 million consoles sold, will likely stop around 500 million

Gen 8: If history repeats itself 650 million

Gen9: 850 million

Gen10: 1 F*cking billion

Probably. It'd require the continuous strength of dedicated devices and the continued expansion into new territories.