Sorry for stealing the words of Mark Twain, but every time a new console is coming out, somebody announces the death of PC gaming. And the more I see, the less I believe it. When the Playstation 2 came out in 2000 it had a launch price of $299, and was considerably cheaper than a PC. It also held a dominant market position, and if you just bought a PS2 and no other console, you weren't missing much for a couple of years. But fast forward to end of 2006 and the situation has changed a lot.
When the Playstation 3 comes out in November, it will cost twice of what the PS2 cost, $599 for the full version, $499 for the "lite" version. I am certain that the PS3 will sell very well, but it will *not* hold such a dominating market share as the PS2 did. The XBox 360 ($399 in the full version) already has a year head start, and has some strong game brands. The Nintendo Wii ($250) coming out at the same time as the PS3 offers some interesting innovations and games beyond what the PS3 can do, and could well win the next generation console wars, due to being much cheaper. But it is already safe to say that the console market will be much more fragmented in the new generation.
Meanwhile PCs have become a lot cheaper. $650 buys you a "gaming" PC from Dell, which would run a game like World of Warcraft smoothly enough. And the use of PCs for other things than gaming in a private household have multiplied since 2000: surfing the net, downloading music, managing and printing digital photos, editing and sharing videos, all these applications have grown a lot, and made the PC a lot more useful than the home office + games machine it was 6 years ago. If you had neither a console nor a PC, and were on a less than $1000 budget, would you really want to buy a console and forego a lot of the additional options you have with a PC? The price of a console is now bigger than the difference between a basic desktop PC and a cheap gaming PC. Plus PC games are cheaper than console games.
The market for personal computer games isn't fragmented at all. Everybody has a "wintel" PC, the market share of Apple is tiny, and there aren't any major games that run only on Apple or Linux, and not on a PC. Whatever console you buy, there will be a bunch of "exclusive" games on the other consoles that you can't play, there is no way to have both Halo and Final Fantasy, without buying two consoles.
In the end, the PC is here to stay, consoles are just developing too slow to keep up with the pace of everchanging applications for private use. And as long as most people own a PC, PC games are here to stay as well. Single-player PC games sales might be declining, but MMORPG sales and subscriptions are on the rise, and millions of people play cheap or free online games on the PC. The battle about the PC's share of the total video games market will have its ups and downs, but reports of PC gaming's death are truly just an exaggeration.
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