Why Xbox One and PS4 may be the final generation of consoles

(Credit: Josh Miller/CNET)

Excited about the high-tech look and feel of the upcoming Microsoft Xbox One and Sony PlayStation 4? Better enjoy them while you can, because this may be the final generation of big, dedicated living room game console hardware.

Based on the cheers and jeers coming out of this week's E3 video game trade show about theXbox One and PlayStation 4, you'd think we were about to enter a new era of cutting-edge game machines, complete with a new arms race of processors, GPUs, and other features. But if you look at how media consumption has changed rapidly over the past several years, and more importantly, how the hardware used to consume said media has also changed, that may not be the case at all.

In fact, both new consoles appear to be lumbering dinosaurs, throwbacks to an era when your technology hardware, software, and processing power were all housed on-site, in one localized package. But, since the launch of the previous generation of living room game consoles more than half a decade ago, we've moved toward a far more connected way to access content, largely through cloud services that can stream both video and game content, as well as live interactive experiences such as shopping and social networking. In fact, the Xbox 360, a console still at the heart of a great many living room setups, didn't even originally ship with built-in wireless Internet connectivity (although subsequent redesigns of the hardware added Wi-Fi, and the PS3 always included it).

Microsoft is at least being upfront that your relationship with Xbox One games is through a software license, not physical media.

Anyone who watches content trends knows that the future, and even much of the present, is not in plastic discs that get pressed at a factory, put into boxes, and then shipped to retail stores to sit until you decide to buy them and bring them home. To its credit, Microsoft is at least being upfront that your relationship with Xbox One games is through the software license that gamers are actually purchasing, not the antiquated physical media that comes with it. Not that this makes the restrictive sharing and trade-in conditions of the Xbox One any easier for consumers raised on trading plastic discs with each other or to retail stores any less annoying.

To see where games and game systems are going, look at how people connect to video content. It's through streaming services such as Netflix and Amazon Prime Video, delivered over hardware devices that are little more than simple online conduits, such as the Roku orApple TV (even "CBS This Morning" anchor Gayle King recently told me she purchased a DVD player specifically to stream Hulu Plus over it). The original Apple TV box was a set-top box with a hard drive for local content. Subsequent versions dropped that in favor of what is essentially a passthrough box for online streaming.

The video game equivalent of this trend is streaming game services such as On Live and Gaikai. Both offload the hardware and storage-intensive tasks of housing and rendering games to cloud-based server farms, literally broadcasting the live gameplay back to you through your TV or Web browser. No, it's not perfect yet, and still far too reliant on maintaining a strong broadband internet connection, but that's why we're talking about the following generation of game consoles, not this one.

That said, at least one of the major console makers is clearly seeing the writing on the wall. Sony's acquisition of streaming-game provider Gaikai in 2012 set the stage for streaming game content in the PS4, and while that won't be the main way you play games on it, some games will be available as streaming content in early 2014 and beyond.

If that ends up working well enough, there's no reason a Sony streaming-games service couldn't be built into other hardware, just as Netflix is built into televisions, DVD players, small streaming devices, etc. That means Sony, and Microsoft and Nintendo, if they follow suit, could exit the incredibly risky and expensive business of planning, designing, building, and marketing $400-$500 plastic hardware boxes with half-decade lead times, and instead become, like Netflix or Amazon's Kindle, a platform for both first-party and third-party content. Even better, like Netflix, On Live, Hulu Plus, and other services, you could simply build future Sony and Microsoft "console" access into smart televisions and other online devices.

A PlayStation 5 could be about this big if it was a conduit for streaming games.

The end result: the PlayStation 5 and Xbox, uh, Two (?) are more likely to look like a Roku or Apple TV than a hulking squared-off gaming PC. It would be far-fetched if not for three things; Sony's existing commitment to stream at least some games, soft sales for the high-profile Nintendo Wii U, and muted reaction to the overpriced, overly restrictive Xbox One.

Think I'm crazy? Let's tune back in four to six years from now and we'll see what the next wave of living room game devices and services look like. If we're looking at more big, black boxes brimming with silicon, I'll be happy to eat my words.