The demise of gaming consoles has been predicted for almost as long as the devices themselves have existed.
When the Atari 2600 ruled the living room decades ago, so-called experts argued that PC gaming would make consoles unnecessary. Now, with the rise of tablets and smartphones, as well as streaming video set-top boxes with built-in gaming options (such as Amazon's Fire TV), some say the current generation of gaming consoles might be the last ever produced.
That could be bad news for console leaders Sony(NYSE:SNE) and Microsoft (NASDAQ: MSFT), as well as third-place player, Nintendo(NASDAQOTH:NTDOY). The future of consoles was hotly debated last week by Advanced Micro Devices Chief Gaming Scientist Richard Huddy, Wedbush Securities analyst Michael Pachter, and Jason Rubin, head of worldwide studios for Oculus, at a 2015 Consumer Electronics Show panel titled, "Emerging Trends In Gaming." Ophir Lupu, who manages the gaming division at United Talent Agency, moderated the session.
The end is near?
Pachter argued that consoles are nearing the end but acknowledged that they are still necessary today, "because they are a fast microprocessor that's connected to your television."
That won't be the case for much longer, he added: "I think that within the next five years, you're going to see the content makers embrace playing their high-quality, fast microprocessor games on any device, anywhere."
Pachter also believes tablets and smartphones will catch up with the processing power of consoles -- PCs already have, he noted -- making the console unnecessary thanks to the increasing ease of porting content to a television screen through devices including Google's Chromecast, Amazon's Fire TV Stick, a Roku box, or Apple TV .
Huddy took a different view, saying gamers want many options to play and that the classic consoles from Microsoft and Sony still have their place.
"There are some people who believe that this generation of consoles may be the last," Huddy said, and some who even ask "'do we need this generation?' The answer is absolutely. People love playing games on consoles and all sorts of different ways."
Rubin staked out more of a middle ground. "If a new console brings a new type of gaming, then, awesome," he said. Otherwise, he does not see a need for new consoles.
What will Microsoft, Sony, and Nintendo do?
Pachter said each of the three major players will approach future consoles differently, but he believes Nintendo is married to the idea of proprietary software on proprietary hardware. Because of that, he argued, the company will continue to attempt to create new consoles.
"Nintendo will never give up until they are out of business," according to Pachter, who made clear his skepticism toward the company's current management.
Microsoft appears to be taking a different approach, Pachter said, noting that the company just transferred a dozen or so Xbox employees into its Windows 10 group.
"They're going to try to integrate gaming into all of Windows," he said. That does not rule out another console, but it might not require one.
"Sony gets it," Pachter added, noting that the company has moved hard into non-console-based gaming with its PlayStation Now and PlayStation TV products. "Those are kind of off-console gaming platforms."
Microsoft and Sony will release at least one more console, according to Pachter. "If it flops the next time, that will be the last console cycle," he said.
Rubin believes whether Sony stays in the console business depends on the success of PlayStation Now - the company's video game streaming service which launched last year.
"If it works as well as we think it's going to work and brings as much opportunity for gamers as we think it's going to bring, that may lead Sony to a long-term PlayStation brand that's successful, but not having to build hardware that they ship to Wal-Mart or other stores," he said.
It comes down to business model
There is a general view in the industry that this will be the last generation, according to Huddy, but it might not be that simple. "Once again we're saying maybe the next generation will [be the last]. With five or six years for each generation, I think what we're saying is we'll know in five or six years if this is going to be the last generation of consoles," he said.
Pachter said the answer is even more clear-cut than that.
"I don't think we need it, and I think, more importantly, there is a business model reason to bypass the console," he said. "The publisher will make more money if you play off-console."
Pachter argued that the console's death is inevitable, because the audience for gaming increases exponentially if you open up games to any device with a microprocessor.
"We go from 250 million consoles to 2.5 billion people on the Internet," he said. "If you increase your addressable market tenfold, the chances of selling twice as many software units is pretty great."
Daniel Kline owns shares of Apple and Microsoft. The Motley Fool recommends Amazon.com, Apple, Google (A shares), Google (C shares), and Netflix. The Motley Fool owns shares of Amazon.com, Apple, Google (A shares), Google (C shares), Microsoft, and Netflix. 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.