A little extreme?  Yeah.  Sorry about that.  Anyway.....

Since the rebirth of gaming brought out by the Nes, the industry seems to have gotten bigger and bigger with each passing gen.  From the tons and tons of players during the 4th gen to the arrival of the Playstation and Playstation 2, the gaming industry has managed to even eclipse the movie industry.  With the 7th gen, it seems that gaming has reached unprecedented new heights....but I think things are seriously going to take a turn for the worse.

Think back to why Nintendo decided to go the route of the Wii in the first place.  Yeah, they got trounced with the Gamecube but they also made the comment about "Too many big dinosaurs".  Too many super powered hardcore consoles just couldn't co-exist so they tried to expand the market by going a different way.  To a degree, it worked.  Then again, how many of those gamers that thought motion controls were going to make them lose 100 lbs. or make them feel like they were on a tennis court are going to stick around for gen 8?  Looking at the Wii U's sales, not a whole heck of a lot. 

Also, of the tons and tons of gamers I know, not very many actual care about the upcoming consoles.  Annecdotal?  Yes.  But most are satisfied with the online gameplay of Madden, Halo, and Call of Duty and don't really want much more.  The new additions of the PS4 and Xbox One are akin to the comparisons of Xbox Live and PSN back in 2008.  What I mean is sure, there's a lot of little things that people will say are improvements but most people couldn't give a fuck less.  All they ever wanted (and still want) is multi-player gameplay, Netflix, and voice/video chat.  A lot of the new features that the One and the 4 tout have been met with a resounding "meh".

The huge advancements have been made.  From 2D to crude 3D to detailed and HD 3D.  We're all connected for online gaming.  Motion controls is a thing.  Shy of virtual reality, what's going to be the big draw?  Grand Theft Auto 4 and Metal Gear Solid 5 garner more excitement than anything announced for the 8th gen.  Outside of us forum dwelling scum, the upgrade to new new-fangled consoles with no backwards compatibility just doesn't make sense.  Even I, a gamer since the 80's and owner of every 7th and presently released 8th gen console (from the big three) on the market am not really all that excited.  The thrill is gone.  Not only that.  So many game companies have simply been incapable of making any kind of headway during the 7th gen with some going out of business.  Even major players like Square Enix have apparently been able to profit from sales success stories like Tomb Raider and Hitman.

TL;DR  The 3DS is selling short of the DS.  The Vits is selling way short of the PSP.  The Wii U is selling way short of the Wii.  The PS4 and ONE are going to come up short, too.  Wait until June 2014 and tell me if I'm wrong.

Maybe a small one. At least a contraction.

Here's a graph to back up the OP.

Dark times are ahead, my friends.  Dark times.

This industry is doomed. We are going to crash and migrate to PC's and Iphones.

Another graph.  Apparently, it's worse than I thought.  :(

I agree that CONSOLE gaming is near an end. Gaming is no where near it though and that's all that matters. If the xboxes/wiis/ps all go away in the next 10 years(which i firmly believe), it won't change much. They have multiple controllers that are rolling out that will be supported by ios/android/windows. Seeing as how the PS4 and the XB1 are both based on the x86 architecture, it will be easy enough to make their games port to one of the 3 future OS's. Does it really matter which thing is connected to the TV(or anything at all) for you to play games with? Not for me ad not for most people if they had no choice. This isn't doom and gloom, this is evolution.

I think the industry as crashed already but the government is hiding it from us

This graph gives me the creeps man. The crash is near...

Gaming has expanded pretty rapidly in the past few generations. If next generation sells less than the current than the industry is in a decline. I don't see a crash coming yet but I see studios to continue to go out of business. Home console systems aren't dead. Tired of seeing people state that the end is near for them. People will continue to buy them in the future. If anything it will just be a smaller market.

How can you state this when the next Sports and Fit aren't even out on Wii U?  When they don't sell or move a lot of systems then you might have a point.