My guess is that Sony will indeed be making more compact lenses for this new line of compact camera bodies..... This is something I'll be keeping an eye on. Clearly this is their answer to the competition for smaller, yet powerful gear: m4/3, Nikon and Canon. I'm sure Nikon is less than thrilled at this announcement, because as Mitthrawnuruodo commented, "Looked at the Nikon Z5 a few weeks ago, but this one checks even more boxes...." I suspect there will be others saying much the same thing. Of course a lot depends upon what one has in mind for usage of the gear, too: how and where they'll be having it in hand.
Tizeye's point about the controls -- "Specifically, single control to adjust aperture and shutter where on the entire 7 Series since the original it has been two. While it doesn't matter if shooting in "A" or "S" mode as the wheel (or both wheels on the a7) controls the opposite function, probably 60% of my photos are in "M" mode." is well-taken if one is a photographer who actually likes to control the camera, but my hunch is that the target audience for this new camera, many of the stated vloggers, bloggers and travelers, more often than not will never take the thing off "Program" mode anyway.