Cellphones started from a much lower starting point which is why their performance increase pattern cannot be just extrapolated in the console industry and just because it worked for Apple, and a bit Samsung too, to fan / help manufacture this demand, it does not mean that the console makers can replicate it and reap the same products. Still, the phone market is a good example of who the main beneficiaries are: Apple and Samsung instead of consumers (many third party apps that use a fraction of what the phone can do for years... cross generation forever...).
In the consoles and the PC space, but you are seeing it on phones too (look at the performance increase between X and iPhone 7 Plus, between iPhone 7 Plus and iPhone 6S Plus, etc... keep going for a bit), we are seeing the pattern of industry cycles slowing down, new manufacturing advancements getting much much costlier, etc... look at Intel even: first they were doing big impactful changes often-ish, then the Tick - Tock (optimise architecture on new process - then release new architecture on existing now stabilised process), to a three phase process where the same node is now used for yet an additional stabilisation phase.
Just because there is demand does not mean that magic happens... look at battery life/power consumption/etc... on phones: we still do not have magic technology powered batteries no matter the quite serious payoff for anyone able to deliver it...
Releasing HW more often means more and more R&D pours in marketing, manufacturing the new device, presenting it, and shipping it to stores (new HW launches are not free) and less in actual HW improvements.
Power is there already and a more consistent user base all able to make use of it does actually a lot of good in terms of ensuring that more and more people have the same predictably performing HW and have not slowed down but helped the progress of the game industry in the past.
Latest software techniques can be used right now and keep being developed in the future, the industry is providing nice meaningful performance jumps and then giving time to developers to iterate on what they do best: software.
I can understand why people that love to always have a shiny new product think they would want consoles to come out every year, why some mega Uber AAAA publisher would want forward compatibility and yearly hardware releases, and why some HW maker may want people to desire and beg for this transition to a iterative model to start and thus help said HW maker increase its profit margins year after year... not sure what is in it for the overall gaming industry or for gamers.
I still see the kind of hand waving used by the industry over initial distribution, over micro transactions, over DRM, over license/not sold vs ownership and consumer resale rights, against used games, over loot boxes, etc... in which there is a hypothetical future full of goodies for everyone if we just trust the industry to put itself into a potential position where they could keep all the profits and give consumers nothing back (but they just wouldn't because that is just how nice and selfless they are

).
But the cellphone and consoles mirror each other.
-They both started as highly specialized hardware for very specific applications. They migrated from very specific applications to more general purpose applications.
-As part of that progress they adopted computer systems which are closer to general computing devices. In fact we know have arm OSs that can run on the same chips as our cellphones.
-As part of that progress to more programmable and general purpose hardware the phones features, applications, and product have gotten better.
-Consoles are set to follow the same track, Sony & MS are platforms, game developers make games. When their resources aren't spend pouring time and effort and R&D into the hardware they can focus more on delivering what it is we want as an industry and what their primary task should be: Games. The Playstation & Xbox platforms should first and foremost be able the games. This should be the primary objective and making the best possible games.
This is why like cellphones, converging the hardware will only produce better applications at cheaper costs of the hardware. It's been our frequent hardware cycle that has allowed for the creation of sub $100 smartphones, and it will be the frequent hardware refreshes that allow for sub $100 consoles which can play photo-realistic games in 20 years.
Yes when viewed in the lens of traditional console making:
-highly specialized- custom built production
-R&D and market
-a product that still isn't comparable to a PC
Then yes, it would not make sense. But the industry doesn't look like that, or at least won't look like that in 5-10 years.
Consoles and PCs are converging. Its unavoidable. Clinging to the model of the past with products of the future will no improve the products.
We talk about the power of the consoles and how time has helped them, but those are the consoles of the past and that time has only helped because of the model.
-specialized hardware
-not as powerful as PC
-Thus programmers time to create new and different techniques to get the most of our exotic and under powered hardware when compared to the latest PC running the latest tools.
The time wasn't a benefit, it was a
necessity due to the model.
We talk about the latest software techniques but there's no chance the PS5 will be able to fully take advantage of the advanced real-time ray tracing techniques.
The hardware just doesn't exist in this form yet. But we can still get some performance gains in a PS5 Pro, developers can begin developing the ray tracing techniques for the PS6 and so-on.
The see a benefit to the roi of implementation because they have a wider base which can use these techniques now instead of figuring it out 3 years into a new console's life that releases every 6 years.
To put it another way, We wouldn't have to wait nearly 10 years to see the improvements in gaming. It would drastically cut the time new techniques, especially those which are hardware dependent, make it into our games.
And yes, this will have publishers and hardware manufacturers salivating, but the fact is for all it's flaws it will benefit the industry more than it will harm it just like the cellphone industry.
The argument you make is that digital distribution is inherently a negative, however that's not shared by the general public. While understandably things like micro-transactions and loot boxes are and inevitable issue with it, as well as the DRM. It doesn't take away from the fact that people find value in things like Netflix, or Pandora, or iTunes, any other media as a service product. The digital distribution model has already been proven in every industry, even gaming where PC has almost completely switched to a digital distribution model. Claiming that it doesn't work or does not benefit the market would be disingenuous when the market decided that's what they wanted. If they didn't digital distribution wouldn't exist because the market wouldn't have bought those products.
The fact is when we look at something like Steam, we see tremendous value to consumers. We see humble bundles and people with hundreds or even thousands of games. On PSN the flash sells generate a ton of revenue to the original game developers. You're complaint about resell and ownership is ironic given how much we know about resell hurting the industry. In a digital distributed console world, developers can drop their prices in the marketplace to whatever they want without worrying about the resell market cutting into their costs.
I've said it before and I whole-heartedly believe this. The current console model, is dead/dying. And It's a good thing. It's toxic to the entire gaming industry at every level:
-Developers are forced to code on 5+ year old underpowered hardware because that's the largest install base
-Adapting current techniques to this older hardware costs money because new API or techniques may not be supported or run well on aging hardware
-These concessions reduce the quality of the games on more powerful hardware such as PCs, the same way cross gen games do
-Publishers demand safe games because they need pre-orders and day one sales to make up their costs
-They lose money in the secondary market because of game resells
-Consumers end up with games designed for 5+ year old plus hardware that basically looks like every other game before it and its sequels because taking risks in the current gaming environment is too costly.
How this is solved:
The convergence of console and PC hardware gives developers consistent and frequent hardware refreshes.
-Low-Level APIs for PC and console help developers get 80-90% of the performance of the hardware right out of the gate before optimizations. Saving time and money
-Designing for better hardware because you have a larger install base no longer limits the games as much and results in more games doing more with the hardware
-Because game development should be faster, cost less, and use more recent tools, publishers should be able to take more risks.
-If digital distribution becomes the norm, publishers and devs can also recoup costs after launch by dropping their prices and could actual have less reliance on things such as loot boxes.
-Gamers get newer hardware, sooner, possibly cheaper, games shouldn't be as held back by previous tools and hardware and a digital distribution model should make console gaming more similar to the steam environment.
These are merely the first steps into a badly needed overhaul for the gaming industry as a whole.