• Forbes.com, Thursday, December 21, 2006 11:01 AM

The tech world is always in transition. Older technologies depreciate over time, to the point where they become obsolete. Thinking ahead to the future of the video-game industry, this could be the last cycle for console systems, like Sony's PlayStation and the tangible software these systems require.

And if it isn't the last cycle, it's certainly the next-to-last. As Internet technology, computer processing speed and storage capacity continue the onward march to ubiquitous connectivity, soon there will be no need for CDs, DVDs, video-game consoles, etc.

However, advancement means intellectual property will become increasingly difficult to protect, which is a bad thing for the music and movie industries--but not for video games.
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The future of publishing is a real-time environment, since business cannot easily steal and distribute the "now." This is great for game publishers, which will be able to construct a game engine, keep it running round the clock on an Intranet, and charge a subscription fee to use it. There are no manufacturing and packaging costs; games just keep giving back.

But writing and publishing games for the PS3 and the Xbox 360 is terribly expensive, and the profit margins are razor-thin. The hardware monopoly wielded by Sony, Microsoft and Nintendo becomes irrelevant when you can play an unstealable real-time game on the family PC over the net. Games like "World of Warcraft," a massively multiplayer game that has done $1 billion in sales, are the future for the video game industry. And it looks bright.

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