You give Apple to much credit. Apple TV will never be able to kill consoles, because it won't be powerful enough to play Call of Duty. These CoD kids are the ones driving the market. Gamers want Skyrim and Assassins Creed, epic "real games" and nothing being made for Apple TV can replace those. I'm sure you love Angry Birds but the kids don't want that crapp
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?