I think there will always be a place for $100-300 inexpensive consoles using physical media a.k.a Nintendo's target market.
Humans fetishize physical possessions and the convenience of digital won't change that.
I also thing they're mis-reading the market. For the reasons stated above, people are perfectly happy buying a 5-year old console that can still play Spider Man, Madden, Forza, or whatever else strikes their fancy. The push towards new hardware will continue slowing down just like it did in the smartphone and tablet markets.