OK, hear me out....
Bringing up the Series S, yes that has clearly been a bottleneck for Xbox this generation, and it's held the Series X back. But we're also talking about 2020 tech with no form of actual hardware-dedicated ML/AI upscaling, and a bloated SDK with so many API choices it actually led to less optimized games vs. more. Those aren't going to be problems for a PS portable.
I think that's beyond optimistic. No amount of ML/AI scaling is going begin bridging the gap between a reasonably priced handheld and a 600 dollar-break even (before accounting for tariffs and assuming current price levels are mostly maintained) machine in 2028 or 2029; unless of course the handheld is prohibitively expensive, which would be beyond pointless.
Plus the other problem is also the cross gen issue. From least to most power, you will have to develop for the PS6 Portable, the PS5, the PS5 Pro, the PS6 and eventually a PS6 Pro going into the 2030s, with PC specs all across that range if they don't wise up. That is utterly ridiculous.
Sony & SIE aren't going to hamstrung their 10th gen systems by just ditching PSSR or cheaping out memory configurations just to save a few bucks at the expense of long-term performance through the gen. They won't make the PS6 and the rumored handheld on different technologies, and that handheld isn't going to have its own dedicated software library so it won't risk siphoning resources from PS6.
It siphons every kind of resource just by existing. Logistically, financially and technologically. This "just scale it bro" thing has never and will never be achieved, but you know what? To whatever extent it has been put in practice, devs will always develop from near to the lowest common denominator and then scale up. They'll literally just use the PS6 as a brute force, as we've seen time and time again. More SKUs = less optimization. No way around it.
A PS portable is a way different thing vs PSVR2, because the market for large, socially isolating headsets in general isn't very large, let alone for gaming.
The market for dedicated handhelds isn't large either.
VR won't have truly mainstream appeal until they get that thin, fashionable iPhone-like moment paired with real software ecosystem support, so that's a ways off. PS Portal hasn't really been a detriment to PS5 I feel, because it's just a streaming handheld. Devs don't have to do anything on their end to get games running on that thing.
Then streaming devices are fine, if still a logistical distraction.
The PC ports, I agree those are likely causing some gradual build-up of long-term damage, particularly because of all the non-GAAS which have been ported already plus the fact their GAAS strategy was partly in favor of having more games on PC, and we've seen now a lot of that has come at the expense of non-GAAS 1P one way or another. But we won't really know the impact of the PC strategy until PS6 launches, and that also depends on if SIE haven't already internally shifted to a more sensible (scaled back) strategy on that platform going forward.
They need to perform a metaphorical orbital strike on that strategy. All they've done is train 2-4 million+ PS4 users and a potentially similar number of PS5 users to understand that their game library will be totally available on a competing platform. We know the impact of this on Xbox, and we know that Nintendo has created a very lucrative autonomous zone for itself by not doing it.
Talking about userbase contraction though, the truth is unless there is a PS handheld next gen, there's going to be a contraction regardless even if SIE does everything right and avoids the mistakes they made this gen. That'll happen due to pricing trends likely being reflected again 10th gen (i.e no real price cuts, potential price increases throughout the gen),
Well this gen is experiencing a pricing problem because of a bunch of geopolitical shocks, but 2 major shocks that will almost definitely not occur again by the time we get to late 2028: Coof economic policy and a tariff fetish.
But you have to ask what it is that is causing the contraction we've seen now. Is it the consoles that are 100-300 dollars more expensive than last gen and the 70 dollar games? If it was that and that alone, you would have to assume that Xbox would be at least doing better than it is right now and that the PS5 would be even further behind the PS4 than it is . Microsoft's got a cheap hardware point and a subscription service that gives you day one access to a number of major releases for the price of just over 2 full AAA games per year. Last year they had Call of Duty. By the end of this year they'll have that, Oblivion, Doom, and the new (80 dollar) COD.
You would at least expect Doom to have garnered more than 3 million players being available on a 20+ million subscriber service and ala carte customers on both PC and PS. But maybe it's because the games are lame and the really good ones that are worth the money AND the time/attention are becoming more and more infrequent. Dark Ages isn't shit, but it's underwhelming; too similar to the last 2 instalments to entice new people, too different in the wrong ways to excite older fans.
Pricing matters yes, but what matters more is the package you're seemingly offering in conjunction with that price. If AAAs remain 70 dollars with the PS6 but are basically super-rezzed PS4 games with continued worsening creative direction and writing, I guarantee the games and the console will sell lower than both the PS4 and the PS5. If the first party pipeline is as inefficient and as lacking in PS4 lineup level appeal as it is this gen, the games could be 60 dollars, and it still wouldn't be as successful. And that is what the reality will lean towards with all of these things compromising the PS6.
continued growth of certain PC gaming platforms like Steam
Consoles have outgrown PC in revenue in the last 8 years and will continue to do so (especially when it comes to premium game sales) and if MAU is growing more on PC (which I'm not sure it is), it's not the MAU you want to subsume PS. Mostly free riders playing F2P stuff. What Sony needs to do in a market where Nintendo has a stranglehold on family friendly IP and semi-handheld gaming, and where PC dominates in indie access/F2P is entrench themselves as the curated, cutting edge premium ecosystem. Not try to tip toe on all 3 fronts.
Constantly undercutting the ecosystem for the sake of moar users is exactly why Microsoft is in the position that they are now. The methods and rate of impact may be different, but the underlying ethos and impacts themselves have shown themselves to be very similar.
and less exclusives (1P due to higher costs & longer dev times for AAA, potentially fewer AA than should be, so less releases; 3P due to less reason from 3P and platforms like Steam & Switch 2 getting more preferred Day 1 treatment).
They just need to fix those issues on a first party front. I get that it's easier said than done, but they can do it. From the Insomniac leak, they themselves recognized the elephant in the room regarding SM2. Triple the spend compared to SM1, even accounting for the ridiculous licensing fee (which Disney cannot continue to demand as the box office takes for all their IP decreases and other devs/publishers refuse to take them on because of it), costs alone were more than double both '18 and Miles Morales with very little tangible indicators to justify it.
We know it, the devs know it, Sony knows it. There's a personnel and cultural layer taking advantage of all the coof WFH orders, bloating workflows, and media-assisted picketing over crunch that lasted a decade. It will take decisive action and a whole bunch of layoffs to deal with. We've got the latter covered at least.
On the third party front, not worried about the Switch 2, that's for sure. We've heard for the last 2 gens that this time 3rd parties are going to support the anemic hardware going through the whole of the next gen. Not going to happen. Most of the stuff 3rd parties have announced for the Switch 2 are ports of cross gen games coming up to 5 years old.
Also it's clear in places like Japan non-portable consoles are shrinking in appeal
While PC is (seemingly) gaining ground there. I'm not sure precisely how far behind the PS5 compared to before in Japan, but last I checked, the gap was way smaller than thought. So then why are PCs growing? Less exclusivity no doubt, and more tending of the Japanese audience towards freemium games, sure. But then I also think that all this remaking, remastering and reduxxing that Japan is doing at the expense of new titles (to a similar or greater degree than Western publishers) is eroding appeal of new machines, whilst also giving weaker spec machines a chance to collect that library. Like, it'll he more than 10 years between Persona 5 and Persona 6 at best. Why? Because Atlus split their focus by remaking Persona 3 and redoing Persona 4 AGAIN. Btw, flooding the library with old games is another thing that will get in the way of the 9th and 10th gen.
The rest of your post is largely addressed by what I've already said.