If. And that itself would impact the traditional economy. Currently when new hardware released you can generally expect the early adopters, which are traditionally those with more expendable credit, to also invest generously in new software to accompany their machine. Once new hardware brings benefits and improvements to existing software (like on PC) you may find plenty of folks are as content to replay older software (also like on PC).
The console industry has survived on the predictability of buyer habits of owners, this will largely go out of the window but only time will tell how much and it'll impact both console manufacturers and third party software publishers.
OTOH both console makers and software developers want this to happen, albeit much more so for software developers.
Cost of development would go down dramatically if they didn't have to redo things each generation to account for wildly divergent architectures. For console makers, it's a way to prevent there being an opening for users to jump ship to a different platform.
With traditional generations, every time there is a new generation, it represents a good time for a user to jump ship to another platform as all their vested money is now worthless. With rolling generations, a player's investment in a platform continues with each new generational node, presenting less incentive for that user to jump to another platform.
Also, interesting is that it makes it much easier for consumers to invest in multiple consoles as their past investments remain relevant going forward without having to keep a multitude of consoles hooked up. This is assuming good support for back catalog titles which Microsoft appears to be taking seriously at the moment. This means that it's far less likely for a consumer to completely dump one console when they start using another console at the start of a rolling generation versus a traditional generation. IE - even if they switch to play most of their games on the new console by a different manufacturer, they still have their previous console that they can buy titles for.
In other words, it becomes less about the hardware, which is low or negative margin anyway. And more about high profit software margins for the console makers. Who cares if a consumer owns your latest hardware node release if they are still playing your exclusives? The user remains engaged with your platform meaning that it's easy for them to resume spending on your platform at anytime.
IE - I see little to no drawbacks for anyone. Although I guess over time it may get hard to fully support back compatibility. MS has a lot of experience in that area with software compatibility layers combined with a few hardware restrictions. Sony on the other hand have traditionally relied much more on hardware compatibility going so far as to including the previous generation chip in a new generation device.
Regards,
SB