They can absolutely live next to one another, but why take the knees out from potentially massive profit margins? 12 months of a $199 PS4 will yield considerable increases to PS+ subscriptions & software sales, particularly of already released 1st party software (which means potential sale of additional DLC with high profit margins).
I think they have considerably more to gain (financially) by allowing the PS4 to breath it's last breath before the PS5 releases (in a matter of speaking, I know it will live and be supported for years to come). In giving a cheap PS4 a 12 month window to sell, they ensure that titles like GoT, Days Gone, and Dreams get maximum focus & marketing attention without having to split their budget / time between those titles and a PS5 launch.
Fiscally, I think waiting until 2020 to release the PS5 is the wisest position to take. I can certainly see a H1 2020 release happening, but it would have to be in the Feb-April window (tax season) to make sense, I think. H2 2020 opens up more options for them, and would put them 6-10 months out from whatever Microsoft put out, at the most.
This assumes that a new Xbox would afford Microsoft a considerable userbase jump, and ignores the foothold that Sony currently has in essentially all markets. I don't think a 6-12 month headstart would put Sony in any kind of precarious position, nor would it put Microsoft in an insurmountable lead. A PS5 in H2 2020 with a monster launch line-up would sell just as much as it would in H2 2019, and realistically it would probably sell more (better launch line up with wider mass appeal, more units available, more time to assess markets, marketing strategies, etc).
2019 simply feels too risky. I think Sony is completely ready to make the move for a 2019 launch if they absolutely have to if Microsoft pulls the trigger on something very impressive, but I'd err on the side of caution and say 2020 is the considerably safer bet, and the most likely scenario here.
