Last month in this space, I wrote about how I believe the gaming PC (or high-performance PC) as you know it is dead, and I received a number of emails in response. I want to be clear about something; in no way was I implying that PC gaming is dead—I was referring to the binge-and-gorge hardware selections pushed by hardware manufacturers and system builders alike. The bottom line is people are demanding a heck of a lot more for a heck of a lot less, and though there is still a market for premium PCs, the systems of the future will be far more efficient, as will the hybrid vehicles of the future.

The gaming PC will live on, and as content distribution continues to move online, we’re likely to see the PC remain the king of all platforms when it comes to gaming.

That said, this month I’m going to adjust the subject slightly. The gaming console as you know it is doomed, too.

I simply cannot see the current console business model living through another refresh. Though Microsoft is doing everything it can to link the PC and console gaming communities together via its Live online service, Sony seems to be having a tough time competing, even as its hardware costs have begun to come down. There are currently two distinct models in the console market: the one that Sony and Microsoft followed (the traditional console model) and one that Nintendo created.

Nintendo is cleaning up; the Wii and the DS are fantastic devices. Not only did Nintendo succeed in bringing more people into the living room to play games, but it also created a piece of hardware that it can make money on. By now the cat is out of the bag that Nintendo is making a healthy margin on its hardware, developer licensing, and accessories, both first- and third-party. The DS has been embraced by young and old, thanks to some simple yet incredible content. Its game attach rate is enviable in what seems to be a very competitive industry, but in reality there is very little competition in the core handheld gaming space.

Sony and Microsoft are both still losing large chunks of money on their hardware. There is no way around this, as they chose to go down a path in which they lose money on each console sold in hopes that a combination of licensing, game revenues, time, and scale would help them become profitable. Sony gambled on Blu-ray, and although it is a great format, the costs are far too high for the average person, who in many cases isn’t looking for a high-def movie player to go with his old-school television. The PS3 guys banked on the fact that those who want a Blu-ray player will likely opt for a PS3 instead—and this makes sense, except Sony also launched Blu-ray players for much less money, which basically kills the “PS3 proliferation through Blu-ray” strategy.

Microsoft seems to have a better chance of success at this point because it has a strong foothold in the PC space and is actively working to link their communities together. Microsoft has also automatically created extender services for PCs into the living room via the Xbox. It’s hard to say where this might lead in the future, but you can bet Microsoft will leverage whatever areas it can to help increase its distribution. Right now, both the Sony and Microsoft business models are deeply flawed, and in my opinion they will be forced to adjust.

In any event, corporate operating expenses are gold at the moment, and it’s not a good time for big companies to experiment with risky business models. That does not mean innovation should die—quite the contrary—but they must ensure that they create profitable products with no-strings-attached business models. My guess is after this run, the console will never be the same. Nintendo’s Apple-esque model of raking in large margins on its hardware while creating a common ecosystem will likely make would-be competitors rethink their approaches.

So, as is the case with PC gaming, console gaming may survive, but I guarantee you the typical console business model of today is pretty much dead. Now flame away.

Send your opinions to this opinionated guy at rahul@cpumag.com