Sega was commercialized as the "cool" console, but the industry actually expanded under Sony to larger expanded demographics.

This was going to happen anyway. You had the NES generation of kids, then you have a second wave of kids entering gaming in the 90s. The kids who grew up with the NES liked gaming enough to continue to do it, and you had a second wave of kids coming in too.

It was an inevitable compound effect.

The question is if this happened because of Playstation alone which I highly doubt. Sony changed the competition but in no way did they change the word "toys". Arcade games back then also were not considered as toys.

Btw, I think it's not a good thing that kids will get their hands on consoles instead of playing with "real" toys.

Edit: Yes, the average gamer is now an adult. They started playing before PSX and are still doing it.

The industry would've expanded no matter what in the 1990s.

I was one of the kids who entered gaming in the 90's. In the 90's games were considered toys by the wider media and most households until the Playstation. The multimedia effect is the key term here, otherwise nothing would have change. The multimedia effect triggered Microsofts entrance into the industry.

Maybe then there might be another solution to the industry as a whole. Look at mobile phones, there are numerous mobiles which can use Android OS, which includes games produced by many different companies to download. In other words, console industry should be split up, hardware manufacturers should make competiting yet similar consoles all with the same OS on them and game developers just make games that work on them.... in essence, dedicated gaming PCs but for the living room (limited functions, I don't need excel on a games console :P). Of course this idea ends when you consider Apple exists in mobile market.

And arguements on the internet are just about defending someone's opinion. You spend your hard earned cash on the product you want then you goto a website with someone calling it bad. You are going to defend it as it's essentially like them insulting your choice and your opinion. That's all, no real brand loyalty.

The gaming industry increased in size because the Playstation turned the videogame console into the center of the livingroom thus giving you a reason not to buy multiple pieces of media when you had the "all in one box".

IE: My PSX was my cousins gaming console and music center because he had his surround sound connected to his TV and  big screen TV. 

IE: The PS2 made DVD players affordable and Microsoft followed suit with the Xbox. Their sales combined was nearly 180 million excluding Nintendo with DVD players inside, mind you.

This prompts adults to take gaming seriously since they are invested in their living room.

Oh, now it's getting funny. The PSX started entering the living-room? Because it could play audio cds? I know many reasons why people bought the PSX but I never heard anyone saying because of audio-cd-playback.

The reason why Sony had a huge success in the industry was because of BigN and Sega sleeping for a much too long time. I can only speak of Germany but here Sony's success was ads. Ads all over the place, you couldn't escape the Playstation. Deals with big TV-channels which mentioned Playstation whenever possible, aggressive marketing all the way. It played out for them, sure. But it had nothing to do with "multimedia" in the beginning.

If SCE left the console/hardware making business due to the lack of profitability, it would be a sign that video game consoles themselves had become relics of a previous era and had lost their relevance as entertainment centers. While you can rule out corporate bungling/mismanagement as the reason for a company leaving a market (Sega, Atari), if Sony exited, it would be more likely a greater indicator of the overall state of the market and the lack of ability to adjust to changes or anticipate future trends.

It's entirely possible that the future of "game consoles" is cable/TV/internet boxes that also happen to play games tailored specifically for said hardware, but at this point it becomes a valid question as to whether the purchase of a branded game playing box even becomes necessary when the "box" can be in any laptop or desktop PC the consumer owns, or any other device that's already connected to a network service.

The future of consoles may well just be that: network services that are accessible by more than just proprietary hardware. In this future, dedicated consoles would be little more than a cheap box that grants access to the network services but doesn't do any of the actual processing for the purpose of having a branded piece of hardware that can be marketed, purchased and placed in consumers' living rooms/homes.

If Sony left the gaming hardware business, it would also mean abandoning the lucrative walled entertainment media business also as the PS3 has in effect become a set top box for accessing streamed, downloaded media and services in addition to functioning as a dedicated, proprietary gaming device.

Considering how Sony has a great deal invested in actual content from the music industry, film industry and television industry, if you weren't accessing their media from a Playstation X, it would still be accessible from a Playstation Network on a Sony PC or network device. Even if there was no box labeled and marketed as the "Playstation," the Playstation would still exist.

I play games a long long time, when i started some of you weren't even born. My father had a Ping-O-Tronic console so that was my first gaming experience. After that I got a Atari 2600 in 1983 and next year I started playing PC games too on a Amstrad CPC (with cassette tapes!!!!) and in 1985 on a Amstrad PCW8512. Then i got the following consoles: Sega Master System (1983), Sega Mega Drive (1988), Super Nintendo Entertainment System (1991), Atari Jaguar (1993), Playstation (1996), Playstation2 (2001), Playstation3 (2007) and soon Playstation4.

If Sony quits I'll play facebook games xD