In another thread I was discussing the fall of the industry, a crash and so it reminded me of this topic.
Looking at the 3DS and Vita, it's clear that people are moving their handheld gaming to phones and even with the inclusion of touch screens on the 3DS and Vita, they still aren't selling that well. I guess the 3DS has increased in sales since the price drop but it's clear that phones are gaining market share.
Perhaps that is why Nintendo and possibly Microsoft are putting touch screens on their next consoles. It will be a failure because simply having a touch screen isn't why phones are doing well. I think phones are doing well because they are convenient (people always carry their phone) and because the games are cheaper. I don't personally game on phones so I could be wrong here. Think about it, the best feature of the WiiU controller is a feature that the PS3/PSP already have, Remote Play. It's a feature that no one uses and Sony didn't even include the feature in the Vita.
Anyway, I think the industry is in decline for a variety of reasons. Gaming on phones is one, maybe the industries complete disregard for consumers is another. Remember, in 1983 people just stopped buying games and retail stores were left with stock they couldn't even clearance out. That CAN happen again.
Have you noticed how Sony has been removing features from existing products? That shows just how little they think of the consumer. It's a trend across the entire industry. Anyway, let Microsoft follow Nintendo into failure. It's worth a shot since they can't keep doing what they are doing. After all, is a 360 game 60 times better than a phone game ($1 vs $60)? I think so but more and more people don't.