The 360 is such a special case that it need not be adressed. The PS3 failed more than the PS2!? Really? Can you prove it? My launch PS2 broke, but my brother's launch PS3 still works, so extrapolating from that I'd have to say that you're 100% wrong. Now, that data is of course skewed and unreliable, but its better than yours.

Even if HALF the 360s aren't counted (FORTY MILLION), then the market still grew, so you really are grasping at straws.

seriously?

With Sony and Microsoft pushing the PS4 and XBO to replace set top boxes, the potential for this generation to grow over the last is very high. In the US alone there are an estimated 160 million set top boxes. I think 100M PS4 and XBO's in the US alone is a very possible scenario. Extend that world wide and the two of them alone could sell nearly 400 million units.

Console are becoming a very low cost, streamlined, easy to use computer. With all of the indie development and the move to x86, many non gaming, and non media programs will begin to change the perception of what a console is. In this regard MS has a massive advantage with Windows Phone/Xbox One/PC, all of which will work as one later in the generation. By the end of this generation, doing online banking, ordering from amazon, getting pizza delivered, or checking email via XBO and PS4 will be a much more normal task, just like it has become on phones in the last 5 years.

Game console as we know them are changing, and with that change different business models may be required. Right now the likes of Ouya and Amazon Fire are just in their infancy, but as the years pass, and they continue to come out, and upgrade like phones, E-readers, and Tablets, they will start to become a threat to the old guard. Sony and Microsoft need to be proactive and adopt to the market trends and stay ahead of the game. For this reason we may see a PS4S and an Xbox OneS type of approach in around year three of this console cycle when the chip fabs shrink, and making a 4K model is possible by expanding the current chip set with more CPU cores, More GPU compute units, and more RAM.

If Sony and MS go the route above, it will keep the generation fresh, and get many upgrade buys. Running both the Original and S models on the shelf. One for $199 and the other for $399 would give them an opportunity to get massive user bases, hitting the high end crowd, and the low income/slow adoption crowd at the same time.

Yes, but you and your contextual camp said that most of the Wii numbers don't count since they were casuals, and that a ton of the 360s were replaced.

So I don't know how to argue anymore, because the straight up data and facts don't work, and I can't even use your own arguments against you. Now I have to deal with this:

"PS4 and X1 are outselling the PS3 and 360 cause last gen was the longest gen ever and people were dying for next gen consoles for so long, when the finally came out people went out buying them all at once"

My conclusion is that no matter what I say, people will say that the console market is shrinking. You people are saying that there are less machines in front of TVs that can play games nowadays than before. You are saying less people are buying dedicated gaming consoles. Less people are buying videogames.

I just can't believe it.

It could be because the handheld market is set to have about 40% or so of the previous generation's hardware sales and that there were/are three contenders nudging the 85-100 million goal post in home consoles in the 7th gen whereas the 8th is set to have one sell about 20 million and another possibly 60-70 and with the leader slowing down quickly at present.
The Japanese home console market is collapsing and the smartphone/tablet/social/browser tsunami has washed everything else away there.

It's clear as day that we're facing a major contraction, unless OP is suggesting that we will somehow see another generation of 530-540 million or so total consoles sold with a crawling Vita and Wii U, an xbox that isn't setting the charts ablaze, a 3DS that is set crash early and fall short of 50% of its predecessor's sales and a PS4 that is slowing down to a pace far below the Wii.
Even if the One and PS4 sold 150 million each, that would still leave the total console market far short of the required numbers to prevent a contraction.
Heck; even if the Wii U, One and PS4, all three of them, sold 150 million units each; the 530-540 million mark could prove somewhat elusive.

OP: people are saying that it's shrinking because it is shrinking. It's not a huge mystery.

Well, if Nintendo just went out of the console business then the market would definitely have contracted, but I don't think that's what you're talking about. So maybe you can explain your post a bit more to me. I'd say that when all is said and done the 360 and PS3 will have sold about maybe 95% of what the PS2 and Xbox sold, maybe more, so that might be a contraction but not really a big one. 

Its the combination of both Microsoft and Nintendo not just Nintendo alone.  If the Wii was not a success and rebounded to just the average of the prior four consoles (~42 million), xbox360 where it is (probably going to end ~87 mil) and the PS3 with its 45% decline from the PS2 (~90 mil), home console sales still would have experienced generation over generation growth.

I actually have no idea! I'm not good at predictions. I like facts though I do think the PS4 will reach unprecedented numbers. What gives the PS4 and the X1 an edge is how cheap their parts will become. I think X1 will pick up if MS ditches kinect, but that's just a big mess they find themselves in!

But it needs to be mentioned that Steambox, Ouya etc are also technically consoles. Amazon is bringing something out to. But I don't think those have to be counted.

Are you saying this thread is dumb? It took me 15 minutes to get all the data and plot it on Calc. Did I waste my time?

Your ignoring 90% of what I said...also I never said Wii numbers don't count or a ton of 360s were replace etc.   Your grouping me up with other people when were not even saying the same things.  Also you haven't even given your predictions for what this gen will sell, you should sit down and actually think about it.