Those of us in the game development industry have a good year ~ 18 month lead on consumers in terms of what is being produced. I have been assisting several mobile or PC game projects the past year, and I have several more on the horizon. But some people continue to ask me when I'll make a "return" to console-released games. For a significant number of people (though a small % of gamers) consoles represent the apex of gaming.
They do not realize that consoles, as we knew them in the last decade, are already dead.
This is not a prediction - it is a statement of fact. Any news article or industry piece I read which seems to still consider consoles to be kings of gaming is automatically disregarded. The only developers who still actively advocate console supremacy are the people who have a lot to lose - and are trying desperately to ignore what has already happened.
What has happened?
In a nutshell, mobile gaming happened. To a lesser extent social gaming happened, but that was really an expanding of "gaming" much like the Wii. Combined with the decades-long trend of gaming going mainstream, it has been inevitable for years that consoles would lose their primacy in the gaming world. Sony and Microsoft have been fighting over the same small 15% of the population (18-35 year old men) for so long, that the industry as a whole has started to respond more to the other 85%.
This means that strategic decisions - specifically spending on marketing, development, and service - are now looking to cater to the 85% of the population who play games but don't know what a "FPS" is. Console gamers started as a niche market in the 80's, grew to be the face of gaming by the mid 90's, but have now been relegated to a niche market again as gaming overall has expanded to mean a whole lot more than which version of Akuma we'll see in SSF5.
Same as it ever was
This isn't the first time the game industry has expanded - games were originally targeted at a bar scene, then expanded and became primarily a children's toy, then expanded again and became the de facto entertainment for young adults. Each expansion has dramatically increased the money and social power wielded by the game industry.
The problem that console gamers are experiencing is the fact that, from their perspective, nothing has really changed. We still see big-budget console games released with lots of fanfare, and there are still hundreds of secondary games in the pipeline as well. How can console games have lost their edge? But these gamers are looking at the wrong end of the pipeline - the finished product. If they investigated the opposite end - investment - they would see that console games in 2010 represented only 1% of new investments. That was almost 2 years ago that the financial people largely stopped putting money into consoles, and the effects of that are readily apparent within the development community.
What This Means
All of this translates into another renaissance in PC gaming, a sharp rise in video-streaming services like OnLive and Gaikai, and a continuing flood of mobile games. Consoles will still exist of course, but much of the innovation and bleeding-edge have moved on to other platforms. This means more clones and sequels on consoles, with fewer and fewer "gotta-have-it" moments of insight.
The really interesting question - one hotly debated within the community - is what this means for the next generation of consoles (PS4 and "Xbox720") - will they sell? The WiiU is certainly well-positioned to do well for itself, since it has embraced downloadable touch-screen games and thus will have access to thousands of mobile-style experiences. But when a few million people shell out $500 for the latest Microsoft console, how much of the industry will be around to take notice?