I'm always amused when selling several million of anything gets spun as "not selling well". Possibly something else is meant - such as not selling as well as the best selling console platform, or not selling as well as the previous X Box? But the OP lacks any information, and neither of those are equivalent to "not selling well".

don't think its entirely unlikely that the next generation of "consoles" might just be the cloud connected to some relatively dumb terminals. The economics of that make sense, but I'm on the fence over whether internet infrastructure will be able to handle it.

For the foreseeable future, this will only work in limited regions, not as a global product. Gaikai and OnLive included...

E.g. I'm in Melbourne, Australia - commonly #1 or 2 on the "worlds most livable cities" lists.
Yet, our government's long term infrastructure plan is promising to deliver me up to 25Mbps down-speed (and no promise on up-speed, and no promises on what the minimums or what "up to" means), within a delivery timeframe of 10 years from now... Meanwhile other countries are hooking up 1000Mbps as we speak.
Also, even if I do get a nice ADSL2+ quality connection 10 years from now, I'd still be stuck with 250ms ping to the nearest cheap datacenter (in the US, or Singapore, or somewhere) because hosting a local datacenter requires you to (extremely expensively) bond 100-1000 DSL lines to pretend you've actually got a lot of bandwidth...

My office used to be a telecommunications building, so I'm lucky enough to have the option of fibre-optic speeds there... But it costs an unreasonable $2-$5K USD per month, so we're currently bonding 10 1Mbps DSL lines instead

That's not entirely true: Sony bought Gakai

That's true, I had forgotten about that. But I also don't know if that's quite the experience they need. Building and running a cloud service for general-purpose, 3rd-party use is quite another from building and running a purpose-built service for game streaming. Most of gaikai's tech was around real-time compression and adaptive video streaming, not in dev-ops or scalability or service management. They might have expertise they could bring to bare, but they don't appear to have the experience.

Not to mention that all those folks are presumably working on integrating gaikai's functionality with PSN.

It won't surprise me when PSN gets cloud compute, or that gaikai people might play a role, but I think that's not something that will happen until the tail end of this generation or next.

But sony will head there too. In fact, I don't think its entirely unlikely that the next generation of "consoles" might just be the cloud connected to some relatively dumb terminals. The economics of that make sense, but I'm on the fence over whether internet infrastructure will be able to handle it.

Average internet connections just aren't fast enough yet. In places like Japan, South Korea, maybe, but in the US, the average speed is still pretty low. Like Hodman posted, any product along these lines would be tough to field globally. I would say it's gonna be a while before we get to the point where average speeds are high enough to make straight up cloud machines.

I personally don't know what to make of the new consoles. I have a PS4, and I can't say that I'm extremely impressed so far. To a degree, putting more computing power onboard a console doesn't really do much these days when it comes to just straight up graphics. That being said, however, it is possible to find innovative uses for that extra power that doesn't involve graphics necessarily....but I'm not sure if this will happen. But in terms of the console market dying out, the sales numbers are pretty strong for both consoles, despite the losses. This generation seems strong, but after this, I have doubts that consoles will fair very well. Just look at the amount of multipurpose machines already out there, smart phones and tablets replaced handheld consoles altogether (for most people at least). How long before we get something to replace consoles? It'll happen eventually.

Just look at the amount of multipurpose machines already out there, smart phones and tablets replaced handheld consoles altogether (for most people at least). How long before we get something to replace consoles? It'll happen eventually.

I have only flicked through this but i think aswell for both the fact most big games are still being released on xbox 360 and ps3 is another big reason that they may not be making the big money you would expect

The problem with handhelds is what it has always been; limits of battery tech and heat issues. It's all very well and good looking pretty but it'll murder your battery pretty quickly and, personally, I don't like a device which gets hot in my hands either.

I pretty much only play PC games or DS/3DS games nowadays. I've never noticed my 3DS XL getting even the least bit warm (I notice cheap laptops heating up very badly, though). Battery issues are a problem however, but I almost always have mine plugged into the adapter anyway.

For me, "mobile" means when I move ten feet and flop down on the couch instead of working at my computer desk.

I pretty much only play PC games or DS/3DS games nowadays. I've never noticed my 3DS XL getting even the least bit warm (I notice cheap laptops heating up very badly, though). Battery issues are a problem however, but I almost always have mine plugged into the adapter anyway.

Just look at the amount of multipurpose machines already out there, smart phones and tablets replaced handheld consoles altogether (for most people at least). How long before we get something to replace consoles? It'll happen eventually.

I dunno about that; the 3DS/3DSXL/2DS continue to sell really well for Nintendo, 12.24million shipped last year with a total of 43.33 in it's life time.

The problem with handhelds is what it has always been; limits of battery tech and heat issues. It's all very well and good looking pretty but it'll murder your battery pretty quickly and, personally, I don't like a device which gets hot in my hands either.

Consoles as we've known them might not survive but I'm still not convinced it'll be mobile for everything for quite some time yet...

I don't necessarily mean that there'll be mobile devices for consoles, just that we may end up having stuff along the lines of a multipurpose home media server/computer type thing, with something like an app store for games, etc. at some point in the future (internet is a limitation to this sort of thing, admittedly). As for handhelds, they aren't nearly as popular as they were 10 years ago, at least that's what I perceive. Maybe it's just me, but it seems like everyone is on to Android or iOS for mobile gaming.