I guess it depends on how much you believe the industry has contracted, and how much you believe everything is just fine.
The X1 is an example of a console with all the third parties in the world developing for it, platform owner purchased exclusives, both full and timed, and deep discount price cuts early in its lifespan, all things people claim the Switch needs to be successful.
I think the big thing here isn't industry contraction, it's more and more core gamers being satisfied with owning only one platform.
The 360 and PS3 finished in a near tie at around 80 million apiece. There's not going to be a near tie or even close to it this time as fewer people are buying both. The industry is more and more dominated by third parties--look how well the PS4 sold its first year with weak exclusives--and honestly the exclusive library still isn't super impressive with Uncharted 4 being the only really blockbuster sales wise.
Thus more people don't see the point in shelling out for two consoles. They can't keep up with all the games they'd like to play on the one they own now that so many games are coming out all the time, who cares if they miss out on some exclusives on the ones they don't own?
Add in all platforms having paid online, and that's another barrier. PS4 owner may want to play Gears 4 or Halo 5 or Forza. But kind of wanting to play those games is different than shelling out $250 plus for a console bundle and another $60 a year for another stupid online gaming service subscription when they're probably already not happy about paying for the first one.
So I think more people that ever are gaming, they're just not buying multiple platforms at as high a rate. I think Nintendo is shooting themselves in the foot here as well. They needed to position themselves as the best option for a second platform for those thinking about getting a second system. A $300 launch price, ridiculously overpriced accessories and paid online does the opposite. Especially when compared to $250 slim bundles from the competition that are only going to get cheaper.