There's been a bit of discussion... Actually, there's been a shit ton of talk about whether the eighth generation of consoles will be the last. The idea that we're never going to see a real PS5, Xbox Two or whatever nonsense Nintendo cooks up is an asinine one that is, unfortunately, shared by many short-sighted pundits (are there any other kind?). Let's examine three of the most prevalent reasons people are predicting the death of the console market.
Number 1: Cumulative console sales are down in 2014 compared to 2007.
Cumulative sales compared to 2007 are a bit of a false correlation, because it ignores something that was happening in 2007, mainly the mad frenzy that people had for the Wii. Seriously, that system was hard to find for much of the year, even going into 2008. In reality, as Machinema points out here, the PS4 and Xbox One have both outsold their predecessors quite handsomely, comparing the first four months of each system's life. There is a huge, HUGE demand for this stuff, so why would any company turn down free money? This is especially true of Sony, for whom the Computer Entertainment division is one of the few bright spots in a relatively bleak landscape.
Number 2: Smart phones and tablets are taking over!
Are they? Without concrete software/micro-transaction sales or ad revenue, it's hard to say, but for this statement to be true, it would have to be a guarantee that everyone buying smart phones and tablets are gaming on them. Obviously that's not the case. There's probably more than a couple of smart phone and tablet users who have no interest in playing games on them. Maybe they're using them for music, or movies, or web browsing in Starbucks, or - GASP - actually calling people and doing business-related things. While there may be some consumption of passive media on game consoles, people buy them mostly for gaming, as Microsoft is learning now as Sony builds a large, commanding lead in the race.
Furthermore, smart phone and tablet gaming is a different beast. The free-to-start model, as Satoru Iwata so eloquently termed it, is far and away the prevalent business model for phone and tablet gaming. The problem is that, rather than getting money from a large number of people, they tend to rely on whales, or people willing to spend a very large amount of money on a game. That's why so many phone/tablet games play similarly to Facebook games, with energy bars, absurd grinding requirements, or other ways to make actually playing without giving money on a continuous basis a chore. And the games that don't use that tactic? The "cheap app mentality" has been engrained in many people, and they won't buy something unless on the iOS/Android stores unless it's extremely cheap. It's even showing in PC gaming, where more and more people won't buy games at full price, opting instead to wait until some stupidly low Steam sale hits. These aren't really a problem in the console space, as AAA games rarely go on sale, and even more rarely end up selling for pennies on their original price.
In addition, while smart phones are becoming more and more powerful, are we truly to believe that more powerful home hardware won't come out to match? PCs are already more powerful than the PS4 and Xbox One if you're willing to pay a whole bunch of money, and in six-to-eight years time, those prices will come down enough for a stupidly awesome console to come out in the future.
In reality, smart phones and tablets haven't even killed off the handheld gaming market. The 3DS is a juggernaut. It's served to prop up Nintendo, who would be in a far, FAR worse position right now if not for the dominance of the 3DS.
Number 3: Digital distribution, cloud gaming, etc...
This is perhaps the greatest fallacy, that most users don't want to go to the store anymore. This despite hundreds of millions of CDs, DVDs and Blu-Rays being sold yearly. The problem with many who make this particular argument is that they're coming from the view that most people are highly connected individuals like them, who have absolutely amazing internet and no trouble downloading or streaming anything at all. The problem with that is, in large parts of the US and much of the larger world, that internet speeds are somewhat lacking for increasingly bandwidth-intensive tasks such as HD streaming and game downloading. Also, there's definitely value in increasing the options for impulse buys and the like by having things on a shelf. Look at the Vita, for example. The system has a large, vibrant selection of digital titles, but the selection of physical titles is nothing less than abysmal. By contrast, the 3DS is the reverse: not a very great eShop, but a large selection of physical games. Perhaps its coincidence that the 3DS is so far ahead of the Vita that the latter isn't even worth discussing, but I can't help but wonder if the small selection of physical games, and the resulting smaller retail space it receives (seriously, go to a Wal-Mart or a Toys R Us, it's sad to see the Vita tucked away in a tiny corner like it is) are perhaps effecting exposure.
Then there's cloud gaming. Look at the sad state of OnLive right now. It's mostly been derided as a laggy, lower quality experience, and it never really caught on. PlayStation Now has had good reviews, but so far, the only servers people have tried it on have been in the convention centers where Sony's been showing it off. Where the rubber hits the road is whether someone in Miami, probably connecting to a server in St. Louis or something, can play lag-free Call of Duty multiplayer and not have the image look like someone smeared Vaseline on the television.
Of course, this all ignores the currently hazy outlook for net neutrality in the United States. If ISPs are given free reign to discriminate against certain types of traffic, the prospects of digitally downloading large games are going to look even bleaker for most Americans. Comcast, AT&T, Verizon and the like fighting like mad for the right to extort internet services, mostly to protect their cable services, and the price might be too high for Sony, MS and even Valve to pay every single ISP the potential millions, if not tens or hundreds of millions of dollars needed to get on the "fast lane." Without that privileged access, downloading that 13GB Dead Rising 3 update's going to be a lot more of a hassle...
Put shortly, consoles (and physical games) are likely to be here for a long time to come. The pundits are making the classic mistake of assuming one thing will destroy the other, rather than compliment it. Remember when the Wii came out, and everyone was having a similar discussion? About how, rather than making large, immersive games, companies would instead focus on cheaper, gimmicky waggle titles? Did that happen? No, it didn't. TV didn't destroy radio, internet hasn't destroyed TV, and the prospects for tablets to kill off consoles are pretty damned low.
Put short, consoles aren't going away any time soon, and I'll see you all in six or so years for the PS5 launch.