Consoles are overall doing well currently but the picture is a bit more mixed than that I'd say. Xbox hardware is fading into irrelevance and while the PS5 is doing really well it's falling behind the PS4 despite that happening to its biggest competitor historically. If it wasn't for Nintendo making a massive comeback with the Switch the console market would be looking kinda rough compared to gen 7 and I expect Sony will have at least a bit of trouble getting people to upgrade to the PS6 so for the console market there really is a lot riding on the Switch 2 having strong legs.

It's an oversimplification.
Based on its insane launch and that it will have Pokémon, Switch 2 is sure to crack 100 million lifetime, and could hit 120 million or more.
PS5 is doing extremely well, though Sony could screw things up with PS6. It's probable PS6 will be $700 (like PS5 Pro), and it's not crazy to predict it could be $800. The price alone is unlikely to put Sony in a PS3 situation again, but software could. PS4 has had a ton of software support post-replacement, and PS5 is pretty much implied to have even more cross-gen support as PS6 arrives. If people can play the games they want to play on PC and PS5, why get a PS6?
Xbox Series is whimpering, with low sales and stock in most countries in the world right now and the last year or so. Xbox is still on track to launch another console (their fifth) in 2026-2027 it seems. Microsoft has a lot of money to spend; this isn't a Sega situation right now.

There's still a solid chance PS5 outsells PS4 due to the gen potentially lasting longer, and even if it doesn't it's a lock for 100 million plus which is better than PS3 or any Xbox console.

For now, it's really only Xbox who aren't thriving, and that's due to their own appalling mismanagement. 

That's true though the average per year being lower still wouldn't be ideal. I did say the PS5 is doing really well so to be more clear I think the overall picture is more mixed than that cause one of the three main console makers since 2001 has given up on trying to sell a lot of consoles and its main competitor isn't outdoing its previous system despite that. Basically if the Switch 2 sells less than the Switch 1 as expected then the console market will be heading into a period of overall decline over the next decade after a strong 2020-2023 stretch even if the two remaining major players involved are both still doing really well individually.

"Decline" honestly isn't the horrifying bogeyman that shareholder ideology declares it to be.

So long as you're still making money and you have a large, lucrative and sustainable userbase as PS and Nintendo do, you're doing  just fine.

The notion that you're only successful if you're growing is insanity because infinite growth on a finite planet is impossible.

The concern is more how things will be looking 20-30 years from now if it continues but yeah in the meantime both of them will be doing really well. When the world population peaks towards the end of century that notion will become even more foolish.

There's been a graphics war going on for nearly 50 years. Sure, it's rare for the more powerful system to be the better-selling system (the SNES beat the Genesis and the PS4 beat the XBO), but that doesn't mean graphics are irrelevant. If graphics weren't important, we'd still be stuck with simple 80s-era sprite-based graphics. Improved computing power leading to improved graphics has been a constant feature from the get go, from 8-bit to 16-bit to early 3D to early HD and so on. Pretty much every major video game company has always been chasing better graphics. Even most of Nintendo's consoles, including the Switch 2, were just "better graphics box" version of their predecessors for the most part. I mean, unless it's doing something completely different, what's the the point of releasing a system that's identical in terms of power of the system it's replacing? The Wii is literally the only major system that stayed roughly the same power as its predecessor, but it tried something different with its motion controls.

The main reason the PS5 is running behind the PS4 is because of supply shortages in 2021-22. By the end of 2022, it was running a 5.7M-unit deficit compared to where the PS4 was at the end of 2015. Sony shipped more PS5 units in 2023 & 2024 than than they did of the PS4 in 2016 & 2017, and as a result that deficit has since narrowed to 1.4M units as of Q1 of this year, less than 1.8% behind where the PS4 was at the end of Q1 2018 (and that's pretty much just from Europe, where shortages hit hardest; the PS5 is actually ahead of the PS4 in the U.S. & Japan). Whether it can fully catch up or even surpass the PS4 remains to be seen and can depend on a lot of variables like the effects of big games like GTA6 or potential price cuts, as well as post-replacement legs (which the PS4 had next to none because stock was nearly wiped out before the PS5 arrived due to elevated demand and couldn't be easily replenished). But I do think it could be close to a statistical tie, maybe 115-120M for the PS5.

Now Xbox is indeed in trouble. For a good while this maybe could have been excused as a result of MS not having any big holiday deals (nearly all of the XBS's LTD deficit in the U.S. from 2021 to 2023 was just from November & December comparing badly to the XBO's first several holiday seasos). It's hard to make that argument anymore, though. Last Q4 was absolutely disastrous, with it being the worst Q4 for an Xbox console ever in the U.S. during the generation proper. The XBS's performance so far this year has been well behind where the XBO was in 2018. It's sales trajectory is looking more like that of a system getting close to being replaced, except the next Xbox home console hasn't been announced. At best, the XBS will probably sell 50M. It could end up well under that.

While this does mean that the total number of conventional home consoles will almost certainly be at least a bit lower than last generation, that doesn't necessarily mean that the number of console owners will have dwindled. There is obviously overlap between PlayStation and Xbox owners, so it's not a zero-sum contest. Market research and surveys suggests a very large portion of PlayStation owners also own an Xbox and vice versa, both last generation and this generation. It's entirely possible that many if not most of the people giving up on Xbox this generation still also own or plan to buy a PS5 (though some may shift to PC instead). Depending on how aggressive MS's multiplatform strategy ends up being, they could end up improving the value proposition of PlayStation while diminishing that of Xbox. That aforementioned collapse in XBS sales that started last holiday season did coincide with the start of MS's "This Is An Xbox" campaign, and there could very well be a causal link between the two.

This.

Its gonna be between eShop (Nintendo), PSN (Playstation), and PC (Steam, Xbox, GOG and whatever's left of EGS and your small form PC gaming hubs like Ubisoft Connect, battle net, etc).

There's gonna be a lot of hardware options to play PC options as more portable and more stationary hardware comes out - you wont even need to buy the latest Nvidia or AMD GPU or CPU, those will be reserved for those who can afford them for ultra high end gaming while there will be plenty of hardware options that will run games as good as the consoles.

Nintendo and Sony will continue to make more hardware until the leadership changes in the future to people who follow a similar ideology that favors digital licenses/hubs that will be playable across multiple devices (computers such as laptops/desktops, AIOs) , tablets and even phones).

Cant say it'll never happen because no one expected any of these companies to charge for online, DLC practices, etc. They'll go wherever the money flows at.

That is mainly why it's behind sure but I was referring to how lately the gap has been consistently increasing month on month despite Xbox sales collapsing and it'll be falling behind the PS4 in Japan before much longer. Close to a statistical tie could happen yeah though so the PS5 is in no trouble at all with how well established it is. It's just a bit concerning how it's doing compared to it's predecessor considering the circumstances and with exclusivity mostly dying like I said earlier in the thread I think Sony could have some trouble with getting people to upgrade to the PS6 since the PS5 might be able to play the vast majority of big games till like 2033 or so.

For XBS I'd say slightly over 40m is the best case scenario for it at this point assuming it's not notably undertracked here and the last paragraph is a good point. The total number of traditional console users won't have changed that much in the past several years but even a small decline isn't ideal when other areas like PC are seeing a lot of growth and kids being less into consoles than past generations is a big deal and could have a significant impact on the market over the next decade or so.

It's true that digital marketplaces allow for bigger profit margins that are capable of more easily offsetting development costs but which company (out of the big 3 or 4 if we include Steam) are best placed to leverage this to their advantage? IE which first party developer can drop a AAA game and keep all the profit to themselves.... cough Mario Kart World..cough...