Well, that's honestly my fear of the moment as far as next-gen goes. Sony's spending gen-to-gen has really been the driver of the recent "arms races"; if they feel the need to take it easy for PS4, I doubt MS will throw the opportunity away to scale back as well. Not that it's a big deal in real terms, but I think a lot of us here being technology buffs take some pleasure in the EE/GS and Cell-style "moon missions," as well as the competitions moves to counter.
I dont know that the "hardcore" model has been proven a failure yet this generation. I think 360 could break out of it pretty soon. For example, this past month was the first in a long time where combined PS3/360 sales surpassed Wii sales (NPD). For another example, 360 is doing better than Xbox 1 at the same point, so would MS consider it a failure? I guess, if you look at the 360 as being in the PS2's old position, yeah it's a failure, but to MS, it's not a failure, it's trending better, and should easily be more profitable, than Xbox 1. Wii sales haven't affected 360, seemingly.
Software is another biggie, it still seems games sell best on 360, not Wii, especially third party games. Look at Madden, 900k on 360, 337k on PS3, 130k or whatever on Wii. Even if 360 is getting trounced by Wii in hardware sales..what if in a couple years on it's still dominating software sales due to the Wii's highly casual audience? And that's not even to mention, PS3 and 360 are the ones with far more important price drops ahead of them. Wii sales have also suddenly drastically slackened in Japan for whatever reason. 26,000 this week. Just around double PS3, where it is normaly 6-1 over PS3. And supposedly, Wii is not supply constrained in Japan at the same time. Sure, that will turn around for the holidays most likely, but it could be the first signs of a fad playing out as well. What will spring 2008 look like? Or how about the fact, 360 did 26k and Wii 34k in Canada August NPD? Sure, the wii is supposedly supply constrained, but I look at the fact hey, whatever the situation, 360 wasn't that far away from outselling Wii in Canada by itself. We could see that again in the USA this month due to Halo 3. I know vgchartz numbers dont have a lot of credibility, but they have "Americas" 360 sales only a bit less than Wii sales last week, which seems reasonable to me due to Halo 3.
If 360 and or PS3 end up selling "healthily" and selling more software in general than the Wii, I dont know that MS/Sony will deem them a "failure" at all.
All in all, I think it's way too early to say about this generation just yet.
I dont think MS knows what to do but go hi-tech..they've spoken about the fact Nintendo could do the Wii because it fits so well with the IP that Nintendo has. MS knows they dont have the IP stable to pull something like that off, imo.
It seems to me like, if you're going to go with a "traditional" console with a traditional, "hardcore" controller, then it being at or near the highest tech of the time is just accepted to go hand in hand with that, and I dont see that changing. What allowed Nintendo to dodge that imo, was going so non-traditional with the controller, but I dont see MS nor Sony having the cojones to do that, especially if (more likely in MS case) their consoles end up highly profitable anyway. In other words IF MS or Sony go low tech, then in my mind that will necessarily mean they have also adapted some "non-traditional" control method to couple with it.
And I doubt that either Sony or MS wants the other one to get a leg up..so they will push each other to higher tech. If Sony was to say "eh, we wont go that hi-tech", then that could just be an opening for the other guy. And vice versa.