How are consoles NOT competing with PCs at this point would be my question ? They have no upper hand in perf/cost (since they don't have the better APIs anymore), becoming ever more expensive HW setups, and no exclusives so does anyone going to think they're just going to plop down all this cash for a diminishingly better user experience in comparison to PCs ?
You never answer the business question.
If you are a third party, why are you going to make a platform exclusive and lose out on an additional 100-200+M machines if you include PC and other consoles?
If you are a platform holder, how many more units are you going to have to shift on a single platform to make up for lost revenue selling to 100-200+M other potential users? Particularly as consoles are no longer cheap and can't sell to the <$300 audience as they used to?
The only company that has made sense with that model is Nintendo, who is using off-the-shelf parts but presenting them 1) in a novel package, the handheld hybrid, and 2) continues to maintain a stellar software output that achieves bonkers adoption, making cheaper games limited to a 'cartoon' aesthetic and not spending big on photorealism or typical AAA values.
Console vendors are supposed to make money by GROWING THEIR OWN platform's userbase.
That's only true if they can make money growing their install base. How many more PS5s would be sold at >$400 if Sony weren't selling titles on PC? Probably none. So selling to PC then gets additional revenue. Ultimately these companies are about making money, not making consoles. Consoles was just a way to do that. With a shifting technological and economic landscape, that model starts to make less sense.
The full extension of your proposition is
1) Esoteric hardware that's harder to use making third parties probably avoid your platform
2) Needs to look so amazing people won't care that their other games no longer work and are happy for a choice of only 8 games at launch and up to 20 in the first year like consoles used to have
3) A dependence on massive adoption to establish a large userbase for selling exclusives to, so...
3a) A necessity to either use cheap hardware t have a low price, or sell with significant losses, the latter of which is shown to just burn money.
There's no reality where a new machine is released at $400, has hardware so unique it puts PC to shame, has a software library that shows it off, has games so appealing people are happy to leave BC behind, and sells 25 million in its first year and every year after until reaching 150+ million and being so lucrative in its software that devs will design for it instead of the other 200+ million PC, PS5s, Switches, and heck, even mobiles, that their multiplatforms can sell to.
The only way you will get a machine where exclusives are hugely appealing is experience, such as Wii, that sold so much so fast that devs were happy to target its input. And that's not dependent on exotic graphics hardware or processor designs, but on interface and general functionality.