The thing you have to watch out for is the game pricing model.
Tablets drive down prices, though you can say game prices on tablets are to some extent subsidized by development on other platforms.
Tablets drive down prices through competition between bedroom coders. AAA titles have no such competition, and are pushing prices up. People will pay for higher quality as in all businesses. It may be less people, and it may take a while for publishers to stretch people's expectations, but that's the issue of balancing price versus demand to maximise profit, and budgeting the quality accordingly. I fully expect £20 games to be present on tablets in some years; you can already spend as much on some apps.
But will game pricing and development on consoles be ultimately affected by cheap mobile games pricing?
That's definitely a concern. If tablets become the lowest common denominator for ports, the consoles lose their power advantages.
Things have been changing since the inception of consoles. Consoles yet still remain.
They come in ebbs and flows. Consoles have moved away from platformers towards shooters. They won't remain their forever, and the tablets may provide the next favourite genres, or even be the birthplace of the next favourite genres.
In relation to your point about gaming not being about the graphics anymore.
I didn't use such an absolute term.
Historically, the difference between one gen and the next ws substantial, such that the upgrade was necessary to enable the improved games. This gen provides a performance level at which many games are possible. There will always be a market for a more realistic experience, of course. But for many, Warhawk graphics on their tablet in a very compelling game will be of more worth than COD8 with photorealism, in the same way Wii was enough with it's well below par visuals. It's all about the
package deal, and the importance of graphics is diminishing due to diminishing returns and changing habits. Many of the games I have played this gen have been simple download titles, easily doable on the tablets only not available on the tablets because the library isn't there yet. When PixelJunk release Monsters on Tablets, or someone else introduces that sort of quality, then I'll probably find myself playing less download titles on console and more on tablet.
Their entire purpose as gaming devices is for passing time. Consoles on the other hand are not. People simply won't look forward to a Saturday evening when they can come home with a group of friends and play games like angry birds, infinity blade or cut the rope on an iPad hooked up to their living room TV.
But when the tablets play FIFA and COD and other games, then they'll serve that purpose. It's pretty ludicrous to think Angry Birds is the pinnacle of mobile gaming and we'll never see better than that. That's like looking at the ZX Spectrum and claiming gaming will never prove popular because all it can do is clumsy 2D platformers. Of $50 million will never be spent creating computer games. Where's the sense in thinking tablet games will never be more than $2 throwaway titles when that industry is
only 2 years old!!
Yes, a bluetooth controller can be made compatible, but without selling one with every iPad/Android Pad/Win8 Pad, how can a developer develop a game with such a controller in mind.
Sell it with the game. £30 in GAME gets you FIFA iOS with the official controller, and EA know you have that controller for all their upcoming titles. Or notably, MS and Sony include it as a feature and pressurise Apple to follow suit. Or Apple release an iBox with a controller as standard that works with iPads. There are loads of options to introduce hardware.
What about stuff like motion control/kinect functionality that is likely to be a critical differentiator with next-gen console boxes?
I expect Sony and MS to push that with their tablet systems. There are already AR games and camera based experiences. Hell, Move could be done on tablet now using inbuilt front-facing cameras!
The point is that you'll never see games with the fidelity, depth and production values of Uncharted and Starhawk, BF3 nor Crysis on a tablet.
There's a whole thread on this (Apple console). There are top-tier devs targetting iOS. Never say never, because there's an untapped install base of 100+ million consumers who haven't got AA games to play yet. Again, tablets ahve been around 2 years. You can't expect Valve and Epic and EA and Ubisoft to have learnt the market perfectly and rolled out AAA titles within 2 years of the market existing. How long did it take computer games to be turned into dedicated consoles with dedicated software companies supporting them?