Jaffe is wrong.
Consoles will be around for a long, long while to come. He's right that, they may become integrated into TV's or other consumer devices at some point, but you will likely still be able to by them individually as well. Here are my thoughts on consoles and streaming games in general.
Let's look at similar, although admittedly different market. Apple is the #1 retailer of music in the U.S. But Walmart is still tied with Amazon for the #2 position. The lesson? Well, you can stream or download MP3's, but there is still a HUGE market for physical discs. The "CD" industry has been dying for about 10-15 years now, but it is still a huge market.
There are several reasons why streaming games via console may eventually be a market, but will likely not "take over" anytime soon or in the next 10 years.
1) From what I have seen, the video from streamed games is compressed to save bandwidth, so it looks worse than a regular game console. Some gamers will resist putting up with the worse visuals. Even if the cloud can play the game at max settings, compression will still affect quality. Downloading a game or having a physical disc would still provide a better picture until ALL areas of the United States have huge bandwidth and unlimited caps. The bandwidth cap problem is particularly a problem as isp's claim that they are having trouble keeping up with demand now.
2) In 10 years, parts of the U.S. will still exist that do not have high speed internet access. And, some that do, will have poor speed and pings that won't run streaming internet. Right now, I live in a city of about 200,000 people and my AT&T DSL connection (6 megs download, 1.5 megs upload) works fine with every internet service (Netflix and Hulu both stream in HD, Steam works fine, Xbox Live and PSN work fine, etc) that I own, BUT it still won't run games on "OnLive". Even plugged up direct to my router, OnLive tells me that my network is not fast enough.
3) Based on #1 and #2, I'd suggest that currently the infrastructure is not currently in place to reach 100% of consumer households. In 10 years, I'm still not sure the infrastructure would be in place. Not only do we need high speed internet in more locations, but we also need universal *high bandwidth* to make streaming games from the cloud a reality. If consoles were to go streaming or even download "only" manufacturers would be giving up a certain percentage of consumer homes. They will not want to abandon that market. Even people with bad (or no) internet still want to play games. While that market may be smaller in 10 years, it will still exist. You've got to remember that Nintendo has done quite well for itself through 2012 with the worst online infrastructure known to man. Right now, and probably for the next 10 years, selling shovelware at the Wal-Mart bargin bin is a profitable proposition. If you're at Wal-Mart, and your kid sees a game, you buy it for him. That transaction doesn't take place if there are not physical goods on shelves. So while things may continue to move more toward digital, the physical games space and the need for consoles to play them on is not going away anytime soon.
4) It would eliminate the used games market. I'm not sure that retailers or consumers want there. If there is demand for a product (even a used product), the marketplace usually provides the product so long as it is legal to do so. There is money to be made on used games. Gamestop and other companies may try to find a way to share the used game revenue with publishers if they fear losing that market. If there is demand for a product, it will likely continue to exist.
5) In the long run, console manufacturers still make a profit on consoles. They get license fees from publishers, they make money on peripherals, and eventually, they make a profit on the consoles themselves. Nintendo makes money on consoles from day one. Why would console manufacturers want to give up that revenue stream? They may lose some money up front, but in the long run, they make a profit. A lot of businesses are run that way - not just the console business. And, companies use their consoles to help prop other other parts of their business. Sony, for example, used the Playstation brand to popularize DVD's and Blu-Rays. It was their "trojan horse" to get those players into people's homes because Sony gets a share of the profits if those proprietary formats become popular (to be clear, I realize that Sony does not "own" Blu-Ray, but they are a member of the consortium and they sell a ton of Blu-Ray players. They helped create demand for Blu-ray discs and players by getting the technology kickstarted in people's homes with the PS3.)
Overall, we will likely see an increase in the amount of downloadable games and streaming capabilities, but I don't think that physical games and consoles are going away in the next decade. The high-speed infrastructure still probably won't be totally ready, and there will still be too much money to be made in having a physical presence at retail (especially casual purchases, like the one mentioned above), and money from console sales will still be a nice revenue stream that nobody will see a reason to give up.