Graphics still matter to a lot of people, and better graphics is a large incentive to get people to upgrade. It's actually a no brainer as it marks a new generation and along with it a whole new set of experiences. The market doesn't depend solely on graphics of course, most of it is on the games.
Yup, and what I have tried to do is estimate the number of people for whom graphics quality was the main attractor this generation. My estimate was somewhere between 15-30 million. Note - this generation. None of us can put a hard number on how many will fall into this category for the next generation of devices, but it stands to reason that it will be fewer, both because the benefits grow ever smaller at typical viewing distances, and because diminishing returns lies in the nature of asymptotically approaching anything, in this case "realism".
To me that paints a disturbing picture for the new MS/Sony consoles. They already provide gaming, media streaming, Blu-Ray playback, and so on. Shifty Geezer asserted above that all the current HD twin users are chomping at the bit to play their favorite franchises with better graphics, and pay the price of a new console to do so.
I don't think that's necessarily the case.
That's where the WiiU comes in, and it is interesting because the situation so neatly parallels the situation with portables and the introduction of the 3DS and the PSVita. And we know how that worked out - the 3DS launching first, and after skimming the fanboi cream stopped dead in its tracks until the great price drop, after which it has enjoyed reasonable but lackluster sales. The PSVita, launching just under a year later, with excellent technical specs and from a gadget point of view, good value for the hardware on offer, bombed completely, to the point that publishers cancel even their announced games. That platform, for all its excellence and reasonable value, is dead. (I think it would be a good idea for the people who enjoy discussing the future of console gaming to show that they observe and learn something from what's in front of their noses. Makes the whole exercise a bit more satisfying.)
Like the 3DS, the WiiU brings a lot to the table to previous Nintendo owners, and just like the 3DS it provides a novelty hook, and good/the best graphics around at the time of introduction. So if the WiiU fails to attract consumers, what does that indicate about the chances of PS4/720, when the strongest card they have to play is better graphics?
Now, the mobile console market and the stationary don't follow quite the same rules, but then again, there is no reason to assume that the same general mechanisms don't apply at least to some extent. That's why I say that the fans of graphics performance have every reason to hope that the WiiU does reasonably well, because if it doesn't, it indicates that the public just isn't particularly interested in stationary console gaming and the upcoming generation from MS and Sony will have a hard time attracting customers beyond the hardest core. There's just not that many of those around, and lower total revenue will have repercussions throughout the eco-system.