But the kind of gaming that Linux lacks is the kind that need pricey components. I can play Organ Trail or World of Goo on Linux right now. If I want to play COD, I'm going to need something substantial. That narrows the user base even more.
That would be equivalent to, say, buying a desktop from Dell (300~500 USD) and an XBox One (500 USD), which is a reasonable cost if someone wants to play the more graphically intense games.
As a reference, the fastest home consoles now(XBO and PS4) are based on an AMD Jaguar core (AMD's version of the Atom), with 8GB of Ram. You can build a (Faster) AMD A10-based machine with the same specs for less than $400 in Canada.
Something like $40 case + PSU, $40 8gb stick of ram, $50 matx motherboard, $70 cpu, $50 500gb hard drive, and a $100 7790 (or even better, the recent price cut 7870s for $130) and you are still under $400.
Not really. More like $4-500.
For a price of a "next gen" console you can build a PC that can run modern games at 1080p. Granted, not the highest settings but even that is achievable for less than $1000.