As the title, this is something i have been thinking of for a while now. And these are the two points to support my notion.

1. Yes, the PS4 is selling better than any PlayStation console and  so is the XB1; the wiiU not so much. Some say that the 8th gen (if we still choose to believe we have gens) won't do as well as the 7th and how that's a bad thing.
   
   I think casuals moving to Mobile, enthusiasts staying with PC is actually all still a good thing. Cause console attach rates are still very high, meaning that be it physically or digitally gamers are buying more games than they ever used to buy. And that's a good thing. The casuals, who never really spend lots of money on games are off with their phones/tablets and those that can potentially spend $60 twice every month of the year for games are sticking with their consoles/PCs.
2. Another big thing is the fact that both the PS4 and XB1 requires a subscription service to get the most out of your console. What this really does is that it prevents people from investing in multiple platforms. While at the same thing making them become more entrenched in their chosen platform. Which probably ties in to why we are seeing the start of mid gen refreshes. 

Absolutely agree.

Excellent post. I do agree with you. Console market has evolved a lot in last decade.

Well, yeah, but those are all terrible things. The rise of gaming as a service, DLC, online subscriptions, DRM, etc. Increased brand loyalty and consumer entrenchment is a bad thing, as is the erection of a wall separating the video game faithful from "casuals," who are so quickly dismissed as feckless and disloyal.

I don't mean any offense Intrinsic, but this essay reads like something dreamed up in a corporate boardroom on how best to manipulate consumers, make them loyal to a brand name, and bleed them of their money one microtransaction at a time.

If the console market is indeed the behemoth you describe we should all be fighting back against it, not celebrating it.

This development towards paying for every scrap of gaming and needing paid subscriptions to get the most out of your software, is not generally good for consumers. It's an adaptive model that came as a response to the market branching out and production costs rising steadily in the past decade or so, and it's costing you and me a lot more, sometimes for inferior experiences at that. Not to mention the prevalence of huge technical and security issues since the PS3/360 era.
And there will be a general market contraction, you can call it becoming more focused if you choose, but the fact remains that the combined PS4 + One installed will likely be considerably smaller than the PS3 + 360 base, the same goes for overall software sales.
Gaming has grown, but console gaming has shrunk, there's a connection of course, the fringe customers have many options now and consoles are actually less streamlined than they used to be in the PS2 era.

The market has evolved but the thread title is downright false; the console market is contracting, not only will it be smaller than in the 7th gen by a huge measure, but even if you take away the convenience segment consumers for the Wii user base, even the 6th gen is a lot bigger, even bigger than the 7th gen.
The console market is contracting, no amount of semantics will change that, but I agree with the overall message of the OP, even if the thread title is faulty.

Playing games is easier and more mainstream than ever. With the rise of CoD, mobile games and now eSports, casuals are more interested in full scale console experiences. Around the same time(perhaps a bit sooner), game developers began creating more easily accessible games. Gone are the "Nintendo hard" days, games are much, much easier now than ever - by design - to welcome in the mainstream. It's actually quite the perfect storm if you think about it.

Agreed, these are all tactics to try to hold on to the biggest slice of a shrinking pie. No efforts at all to expanding the market, rather the opposite.

And Intrinsic, why make the consoles profitable (and weaker) from day one instead of subsidizing the hardware if you're only after the loyal hardcore?

I see no reason to disagree with that.

i really doubt the call of duty crowd spends more than 60$ per month

I really doubt a lot of gamers spend more than or equal to 60$ per month, Ps4 attach rate would be like 20:1 if most users owned their console even two years.