Combined, Sony (NYSE:SNE) and Microsoft's (NASDAQ:MSFT) latest video game consoles, the Xbox One and PlayStation 4, have sold nearly 15 million units. The two devices, released less than a year ago, are currently on pace to outsell their predecessors.
Yet, in spite of their success, they could be the last of their kind: Both companies are investing in technology that could make traditional video game consoles obsolete; at the same time, competing mobile devices are enjoying steady improvement.
Mobile is getting better all the time
Last month, Wedbush analyst Michael Pachter argued that video game consoles were on their way out. At GamesBeat 2014 (via VentureBeat), Pachter noted that the very problem consoles were created to solve -- the lack of microprocessor-equipped TVs -- is no longer a problem.
"I think consoles are going away, because you used to need a console because you could not connect a microprocessor to your TV screen ... Now, if you have a Chromecast ... or a Roku box, you can. So why do we buy consoles? ... Your phone will be powerful enough to power any game in two more generations."
Certainly, the present-day Roku, Chromecast, and other streaming solutions are woefully underpowered compared to Sony and Microsoft's latest video game consoles, but the trend is clearly there. In April, Amazon released its FireTV, a set-top box equipped with a speedy, quad-core processor. Although it isn't capable of matching the performance of the Xbox One or PlayStation 4, the FireTV can play video games with 3D graphics. Likewise, upcoming Android TV boxes, including one developed by PC gaming company Razer, will focus on gaming.
At the same time, smartphones and tablets have seen their processing and graphical power soar, and recent shift toward better developer tools should help mobile developers close the gap. In June, Apple unveiled Metal, an iOS 8 API aimed at game creators. With Metal, developers can take better advantage of Apple's underlying hardware and offer games on par with modern day video game consoles -- Plants vs Zombies: Garden Warfare, a game originally released on Microsoft's Xbox One, was shown running on an iPad.
Sony admits PlayStation 4 could be its last
But the decline of consoles isn't likely to catch the industry' incumbents off guard: Sony's Worldwide Studios President Shuhei Yoshida admitted back in April that the company was looking to move away from dedicated consoles.
Sony's PlayStation Now, its video game streaming service, offers a way for the company to exit the console business. Rather than develop a costly box that may not sell, Sony can simply offer its games over the Internet, streamed to Sony-made TVs, mobile devices or cheap set-top boxes like its upcoming PlayStation TV.
To be fair, PlayStation Now has been heavily criticized for its exorbitant prices (in many cases, it is still cheaper to purchase the game outright rather than stream it from Sony's servers) but this appears to be a temporary problem rather than a long-term impediment.
Microsoft's Xbox in a browsers?
Microsoft's Phil Spencer, the head of the Xbox division, has defended dedicated hardware, arguing that it would still be relevant for the foreseeable future.
But in spite of Spencer's sentiments, periodic rumors have swirled suggesting that Microsoft has streaming ambitions of its own. Most recently, a report from Neowin alleges that Microsoft is hard at work on its own cloud-based video game service, one that would beam Xbox games to any Internet browser. Given Microsoft's extensive cloud computing assets, and its recent white paper research on the possibility of perfect cloud-based gaming, such a service doesn't seem far-fetched. Moreover, Neowin isn't the first outlet to suggest such a service -- The Verge had a similar report last year.
Then there's Windows 10, the next version of Microsoft's operating system. Unveiled earlier this week, Windows 10 is designed to run on virtually every form factor -- traditional PCs, smartphones, tablets and the Xbox. Running traditional Windows, Microsoft's Xbox could become nothing more than another desktop PC for the living room.
We've heard this one before
Of course, this isn't the first time the imminent death of the video game console has been foretold -- Pachter made similar comments back in 2009. In hindsight, that prediction was absurd, but this time truly seems different.
Ever-increasing Internet broadband speeds have made cloud-based gaming a reality, and though they pale in comparison to dedicated gaming hardware, ever-more powerful mobile devices are rapidly closing the gap. With the tech landscape rapidly shifting, it certainly wouldn't be surprising if Sony's PlayStation 4 and Microsoft's Xbox One are both company's last foray into dedicated gaming hardware.
Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Apple. The Motley Fool owns shares of Amazon.com, Apple, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.