I think consoles will become niche because networks will eventually get fast enough so that you see the same dynamic with games that you see with blue-ray/movies. Instead of players needing to buy expensive, specialized graphics rendering equipment they can just connect to a service using whatever user-input/video-playing device they have. Sites like onlive are already trying to do this (though obviously, they aren't really there yet)
I'm not convinced (at least, not for real-time games). Streaming non-interactive video requires advances in bandwidth. Streaming interactive video requires near-zero latency if the rendering is done in the cloud. Without it, there will be a noticeable and frustrating gap between action and feedback.
> Streaming non-interactive video requires advances in bandwidth.
Of course, and also throughput and latency. There is money to be made solving these problems, though, independent of the gaming industry. Compare the state of streaming video now to the state it was 5 years ago and 10 years ago.
