On one hand I think he has lost touch, even with production cost of the unit and software a console war themed market is foreseeable for another 10-20 years.
On the other hand you can remove the cost of producing hardware and sell the design to the vendor who pays you back with some of the profit + other licensing fees,vendor handles repairs and such taking more risk off the console maker. Software makers pay you to sell software for the hardware you make money without all the risk. Now take that ideal and have Sony,MS and Nintendo join together in a DVD/Blu ray like forum. The designs are for stand alone and,2 in one and all in one. Instead of being "competing" systems or formats they become a format standard like MPEG,DVIX,CD audio,Jpeg,BD+java,ect,ect. The vendor can chose to lower their price and sell one feature or rise their price and market saturation and sell to all.
Sure its unlikely they will join together to lower costs for themselves but this scenario is more likely to happen with one or more console makers subbing out all hardware production to vendors who do all the dirty work than nation wide cloud based gaming.
Gaming needs to move to universal platform like DVD........