Why should there be no motivation to try to make consoles the best they can possibly be? Tech is always improving.
I think it is sometimes is cheaper to have a console. I still have my original 360, hasn't broken down yet, and I bought it only a few months (maybe 3 or 4) after the original 360 came out. No need for any upgrading, if it is something that is needed, the games I buy will have the upgrades in them for me. Even my microsoft laptop went bust way before. My 360 is still working. Considering I game a lot, it's got to be cheaper in the long run, right? The only times I have had to purchase something for my console, apart from the games, was a new controller, because my original one died, and an extra controller, because my dad wanted to play Halo: Reach with me.
Plus they are hassle free. Consoles are worth maybe a little extra for that alone. Not everyone is a tech geek that actually knows how to "build" a new rig, or exactly what is needed in order to play games. And are not particularly interested in doing all that to just keep up to date with the newest game releases. I like playing games, not building a computer and to spec it out or whatever. I don't know how to swap out hardware, and I probably never will. So consoles are the best option for me.
Also, not everyone likes playing on a computer. Yes, I have tried, over and over again to give gaming on a computer a shot. Dear god I have tried, because I feel like I am missing out on lots of things. I just don't like it. No matter how hard I try.
So, yes. If there was no new generation of consoles, there would be a lot of people who will not be able to play games. Because PC gaming isn't for everyone, just like console gaming isn't for everyone.