The latest gaming consoles have hit store shelves in most major sales territories with varying degrees of success. Sony's (NYSE:SONY) more powerful hardware and gaming-centric design for the PlayStation 4 seems to be getting the best reception. The multimedia focus of the Microsoft (NASDAQ:MSFT) Xbox One and its associated Kinect 2.0 camera drive up the system's price, potentially causing consumers to look elsewhere. Meanwhile, Nintendo's (OTC:NTDOY) Wii U console was designed and marketed around its GamePad controller, a device in which most of the market apparently has no interest.

The success of PlayStation 4 relative to its console competitors could create the impression that offering increasingly powerful hardware at a market-friendly price point will continue to be the best path to success going forward. Such suppositions could wind up being mostly erroneous, as the future of gaming is dependent on a display revolution.

Same old game
A quick look at the lineups for the PlayStation 4 and the Xbox One reveals that many of their biggest titles will also be available on last-generation platforms. The extent of this trend is relatively new in the gaming industry and is a clear sign that diminishing graphical returns are very real. Increased resolutions and frame rates will appeal to a section of the hardcore gaming crowd, but most consumers are likely to see little difference when comparing a game like Konami's Metal Gear Solid: Ground Zeroes across platforms.


Games developed exclusively for a single platform remain much more likely to show off the graphical flare that is typically expected of new hardware. However, the high production costs associated with these endeavors mean that exclusives will become increasingly rare and will almost always be bankrolled by platform holders. Put simply, the graphical leap put forth by the new platforms is smaller than ever before and a new hook is necessary. Motion gaming has lost its appeal and the Wii U's GamePad doesn't have a future. Enter the long idealized world of virtual reality gaming.

See the future
Privately owned Oculus VR has already been making major waves with its Oculus Rift headset for PC. Prior to the device being sold out, developers could purchase development units for $300. A consumer version is expected to debut below that price. Statements from the company indicate that the device will never hit PlayStation 4 or Xbox One. The fact that the Wii U was not part of these exclusionary decrees is more of a testament to the console's comparatively weak specs and broader irrelevance than a possibility that the tech will hit the system. Rumors and leaks suggest that Sony and Microsoft will soon debut their own VR headsets to avoid being left behind in what could quickly become the next big thing in gaming.

Will Xbox One's Kinect camera finally pull its weight?
Microsoft's decision to bundle the Kinect 2.0 camera with every Xbox One console has been widely criticized, and for good reason. Outside of some multimedia integration and the Kinect Sports: Rivals game from Microsoft-owned Rare studios, the platform holder has done a poor job of justifying the extra cost that the camera adds to its console. That could quickly change if VR headsets become a big selling point for the latest batch of consoles.


Some manner of tracking technology will be necessary to get the most out of head-mounted displays, and the Kinect 2.0 is certainly advanced enough to serve that purpose. Those looking to take the VR plunge on Sony's PlayStation 4 will likely need to purchase the system's camera add-on. Nintendo's aversion to loss leading makes it the platform holder least likely to chase the promise of virtual reality in the near future.

Roadblocks to the revolution
The biggest barrier facing a potential VR display revolution is cost. The technology will become cheaper over time and likely be more central to the next batch of console hardware, but pricing will almost certainly be a prohibitive factor for the mass-market audience, even if the head-mounted displays possess considerable wow factor. The form factors of VR headsets will also need to be spot on, as the failure of the 3D glasses push for home entertainment has already shown that people are hesitant to don funny-looking headwear.

The beginning of a new generation
VR headsets will arrive with the potential for the most significant gameplay innovations in generations. At some point, offering marginally better graphics will cease to become enough to entice the base of consumers needed to sustain healthy business. Diminishing returns are already evident in the latest batch of console hardware and a resurgence of PC gaming suggests gamers are increasingly looking to get their kicks elsewhere. Head-mounted displays are going to be the next big thing in gaming; the only questions are when the revolution will begin and who will be steering the ship. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.