The video gaming industry is in the midst of a paradigm shift. The latest trend highlights the migration toward social media and mobile gaming, which has resulted in the decline of gaming consoles on both the hardware as well as the software front.

Examples include Nintendo's Wii, which has seen a decline in software and hardware sales by around 50% this year so far. Microsoft's popular Xbox 360 and Sony's PlayStation saw sales drop by a combined 13% in February this year.

The big daddy of video game software, Activision Blizzard (Nasdaq: ATVI), recently announced that it would lay off 600 employees. The company's most profitable game (World of Warcraft) continues to witness a steady decline in subscribers.

Is the market for console gaming dead? 

A new gaming era
Well, I wouldn't say it's dead. I would say it's transforming.

People find the tablets cool and a nifty replacement for PCs, laptops, and even gaming consoles. And as tablet devices become more powerful, they increasingly threaten the latter's existence. Apple's (Nasdaq: AAPL) newly introduced iPad is making heads turn with its super-fast dual-core A5X CPU and PowerVR quad-core graphics processor. Don't forget the amazing retina display, which is impressive, even by high-definition standards.

This is what former Sony boss, Phil Harrison, had to say about the future of gaming: "In the proliferation of devices -- you've got iPhones, iPads, iPods, which are all part of the same ecosystem; the speed at which Apple sold 15 million iPads is phenomenal. And the number one activity on an iPad, according to some reports, is games, and I think that will only continue."

Besides tablets, free games on social networking sites such as Facebook are also drawing the attention of the casual gamer who may not be interested in paying for gaming.

Nevertheless, even with these alternative gaming platforms, making money remains a challenge. And why is that?

It's not so easy, baby!
Well, the sheer volume of games available is making it more difficult for developers to gain visibility. One such example is Glu Mobile (Nasdaq: GLUU). This mobile gaming company has had losses since it went public in 2007.

Not so easy, true. But most of these companies are finding answers in mobile phones. The largest growth opportunity will be predominantly in mobile gaming. And even though dedicated gaming consoles would still attract hardcore gamers, mobile gaming would gain a lot more traction in terms of volume due to the popularity of smartphones and tablets, which allow games on the move.

How can you as an investor profit from the mobile gaming industry?
Well, here's a list of a few potential winners:

  • Apple: This is definitely a no-brainer. The Cupertino-based company would surely profit tremendously from sales of its iPhone and iPad devices, not to mention the sales of apps and games that run on them. Add Apple to your Watchlist.
  • NVIDIA (Nasdaq: NVDA) surely stands to gain with its lineup of high-end Tegra 3 and Tegra 4 mobile processors, which run on Android and other non-Apple devices. Add NVIDIA to your Watchlist.
  • Sony claims that it has already sold 1.2 million units of its new PlayStation Vita. Surely it can also utilize its experience in gaming and throw in content from its entertainment business to produce best-in-class gaming tablets and smartphones. Add Sony to your Watchlist.
  • Zynga (Nasdaq: ZNGA) is building its own online gaming platform, which would enable it to expand its revenue stream. That's great! But it stands to gain more from its recently acquired mobile gaming companies. Add Zynga to your Watchlist.
  • Besides PC and console games, Electronic Arts also produces extremely popular game titles such as Need for Speed for smartphones and tablets. With its acquisition of PopCap Games for a hefty $1.3 billion last year, the company has surely made it clear that it intends to ride the mobile- and social-gaming wave. Add Electronic Arts to your Watchlist.

The Foolish takeaway 
While there may be many more companies that can profit from this trend, I would be keeping my eye on the ones mentioned above. You can stay up to speed with the latest on those companies by adding them to your Watchlist. It's free and lets you stay on top of the latest news and analysis for your favorite companies.

You can also check out the three hidden winners of the iPhone, iPad, and Android revolution by clicking here.