The reason why sales are dwindling is quite simple. The Xbox 360 was released in late 2005. Yes kids, 2005! 8 years ago!
Even when it was released, it was not state of the art hardware running in the platform. The gaming industry pushes the hardware industry, and it always has. The problem is with console gaming, now you have a platform that everyone has in their home, static, un-upgradable. Developers want to make the most amount of money so instead of offering games that push the boundaries of hardware, with few exceptions, they instead create for the masses.
Have this run on for 6-8 years and guess what, that PC owner who is playing console ported games does not need to upgrade. That person with that Xbox 360, does not need a new one.
I used to marvel at high end games when I was able to save up enough money to upgrade my machine. I literally bought games just to see how beautiful they looked and how well they challenged my new hardware, now, I don't.