A couple things here:
1) I have no doubt that those hardcore games will remain a big deal and a good business. But I think more casual games, with the right hardware mixed in, could eventually be a bigger business.
2) You look at the Apple TV right now and you see a piece of hardware that can’t match the Xbox. But how far away is it really? I can now play the same Grand Theft Auto III that I used to play on my Xbox on my iPad/iPhone. The Apple TV runs on the same stack (even if you can’t see it yet). And, like those devices, the hardware is on a yearly refresh cycle — not the 5-to-10 year refresh cycle of gaming consoles (which is ridiculous and not tenable going forward).
So let’s revisit this comment in a couple years, shall we?