Yes; the crucial question is whether consoles will exceed what customers can use (i.e. overserve/overshoot).
There exists evidence that it's happening already: xbox360 and ps3 are quite old, but still selling very well, despite PCs growing more and more powerful (a longer gap than previous generations); the popularity of nintendo wii (though I believe sales are much less now); the popularity of simple online flash games; the popularity of xbox "arcade" games (some of which were web games). This has been discussed on HN before.
If your customers don't need more performance, it doesn't matter how more you offer them. Yes, disruption.
PS1 sold well into the life of the PS2 though. There will always be a need for more power in gaming, I beleive because the peripherals will need that power.
There exists evidence that it's happening already: xbox360 and ps3 are quite old, but still selling very well, despite PCs growing more and more powerful (a longer gap than previous generations); the popularity of nintendo wii (though I believe sales are much less now); the popularity of simple online flash games; the popularity of xbox "arcade" games (some of which were web games). This has been discussed on HN before.
If your customers don't need more performance, it doesn't matter how more you offer them. Yes, disruption.