Hi5's Alex St John

Yes. It's funny because the more the console companies protest it the more hollow it rings because, where are they? This is usually when you announce them. It's 2010, how long has the Xbox 360 been out now? Five years? This is usually when you announce them. Any rumours? Heard of anything in development?

There are two reasons for delaying, and the reason for the delay is the reason I'm right. Which is that the problem is, the market is changing. I pioneered 3D – I was one of the people who pioneered it at Microsoft - it was a great idea, I was right. I said, 'you know what, we can completely own gaming at Microsoft by being leaders at 3D because 3D is going to be the differentiating thing is gaming.' And I also said multiplayer interestingly enough. So that huge investment Microsoft made in 3D of course made Microsoft go from being a spreadsheet and database company to one of the world's most dominant gaming companies, platforms and, ultimately, game consoles. So – I was right.

And I also said that multiplayer and networking would drive the PC into the home, and blam, that's what World of Warcraft is – a PC-only game that's more profitable than all Xbox game sales combined. In one title, and it's only on the PC. And so that revolution is usually exciting, but it's over.

I love 3D, and the thing is that people academically say, there's always room for more realism. But actually, there isn't. I hate to tell you this – the problem is that someone academically, when you look at two pictures you say, 'here's an Nvidia 9 3D scene and here's a picture of an Nvidia 10 3D scene – look at the huge improvement in graphics.' Then they objectively look at those pictures and say, 'oh yeah, I can see why people would pay for that.' But the truth is that when people are playing a game, they do not see it because the motion; in their brain the crappy graphics get replaced by great graphics by the imagination while you're playing. Crappy realism gets replaced with great realism while the scene is in motion. So what's happened is there's diminishing return for better graphics – people don't see more realism even if you give it to them.

And once that's happened, games have to be differentiated by for a different reason. And the entire economy that puts consoles in the living room, makes Wal-Mart want to sell them, makes Sony and Microsoft spend billions on devices that are sold traditionally at a loss in order to make a content market, has always been defined by better production values and they can't be achieved. You can't do more 3D than you've got. What that means is that differentiation is happening by community, multiplayer, social dynamics, motion control.

Once that happens, the console loses the business model and the economics that made the console viable, the meaning is lost. When they have to rationalise a new console they have to look out there and go, 'truth is, the most successful console was the one with the crappiest 3D, the Wii. The cheap-assed 3D console – that's the one that beat everybody.' The 3D didn't matter, it was the new input device or it's Xbox Live. So look at the two platforms that are successful. Number one was a new input device with old generation graphics – Nintendo. Number two was Xbox Live with network features. Three was Sony with neither of those but the best 3D – oops.

So they're sitting over there at Sony and Microsoft now – and I don't know that but I can hear them thinking – I can see them going, 'what the hell do we do?' These ones we're shipping are finally profitable, we've never recouped the losses for the 3D we invested in this generation of consoles, we don't want to do that again. This online world is changing so fast we have no idea how to control it or participate in it. You know, that Wii thing was neat, so Microsoft has Natal – neato – but they don't know what to make. Even if say there was a lot of money there, no idea what to make. You can't spend 2 billion dollars inventing a new console and you don't know what it's going to do and the only thing you know is that the thing you used to do is wrong – more 3D: fail. They cannot make an informed judgement while the future is so blurry. There were times when it wasn't blurry, when it was clear what you had to do – it's not that way any more.

In the time that it takes for that future to clear up – five years? - there's something that is certain. Which is that games are just made out of electrons and people have very powerful personal computers and growing internet connections and, frankly, my laptop and connected television is in everybody's room – this idea of a living room is dying, it's going away. The reason the console business worked was that screens were rare and expensive and homes only had one so they had to share it. Now everybody's carrying one around with them constantly, they've got screens everywhere and the games are made out of electrons and 3D chips are a commodity. Once you have that, then the living room just kind of dissipated.

Yeah – and the living room has lost its relevance. I talk about Microsoft because this was my personal experience but when I was there, Bill Gates wanted to get into the living room. Set top boxes, video – I've got to make an operating system for the set-top box.

I'd be in these meetings with Gates and I'd go, "I don't want to piss you off, because I know you've already lost a billion dollars on stupid web TV ideas – no offence, I know you can fire me – but the Japanese walked into your living rooms the entire time you were sat here scratching your heads, with games, children's toys, just swept it."

Powerful, general purpose computers completely took your living room all day and all night while you guys, Intel and Microsoft, thinking you own this market, were sitting there on web TV thinking there's something brilliant in video here. You're wrong – my TV set works fine, if you're a bunch of zit-faced geeks with no Saturday night then you might think a better TV is a really exciting proposition for the consumer, but it's not. They're happy with their videos. You can't add a lot of value to that.

Gaming is the native medium of computing. So Microsoft spent billions on failed web TV initiatives – they had all kinds of set-top box things that nobody remembers. I remember five failed ones from 1993 to 1997. The irony is that, finally, with Direct X they make a game console that plays games and is one of the best on earth at doing it - they're in the living room. It wasn't easy but they got there. And what are they saying now they're in the living room? "We're going to stream music and video". You idiots! Don't you ever learn? My cable TV works fine, if I want to watch TV I can use my laptop. You dipshits. You morons - don't touch video with a stick, be focused – that's why you finally got to the living room, with games. Stop it. Just stand there and say 'we refuse to let the Xbox play video, we refuse to stream that crappy music stuff.' Go get it somewhere else. If Sony's promising it then get a PS3 – we'd love to watch them ride that one right into the ground.

But they don't learn – it drives me crazy. People used to call it the 10ft versus the 2ft experience – and again, I'm sorry but those people are idiots. The screen on my laptop is just as big to my vision when I sit 2ft away as the 5ft screen is 10ft away. The visual experience is identical. Games are interactive. The part that matters is not what your eyes see but what control you have over what's on the screen. A computer lends itself to a mouse and keyboard because it's on a table; TV sets, because they're in the living room, the screen was rare and I had a couch, they had to invent an input device that I could hold in my hand. Game consoles are all defined by the input device that they could support in the living room, which was a game pad. They can't make certain kinds of games work on a gamepad – they just don't work well. The PC gaming experience is defined by very different content – it doesn't matter where the screen is, no one give a damn. It's completely defined by the input device, as Nintendo continues to remember by defining new game experiences which differentiate by input types.

There's going to be lots of revolution in input devices. The graphics revolution – I hate to say it, because I owe a lot to pioneering it – is over, it's gone. More realism's not going to make any difference. There'll be some neat stuff but the future's going to be defined by new input devices and social dynamics and new ways of getting people to beam content to one another. And that's why I joined Hi5 – because this is where the exciting, next generational pioneering is going to happen. And it's going to happen on the PC. The console platforms, it's going to take so long for the market to sort itself out that it's going to have moved past that. Even if you said that the market is mature enough that they can go, 'now we know what to put on the console in the living room', all the games will be broadcast on people's 20GB bandwidth connections over the internet by the time enough time has passed that this makes sense now.

So the reason I know that they're dead is that they are incapable of making an informed business decision. The only decision they can make is the wrong one right now. So they're either smart enough to know that so therefore aren't making a console. Or they'll make the wrong one – so force a new revolution because they think they've got a new idea even while the market's changing very rapidly and hope they can bet on a winner. And that's very risky and expensive.

They're out of their damned minds. It's too bad because it's the right notion and the wrong execution.

I know it can't be done, that's the trouble with being smarter than everybody else is that I know things that other people think. The trouble is that I've been building these technologies a long time and it doesn't work. It can't be done. Speed of light, network switching, latencies, it's just a bad experience. They can't make the economic business work, it's a stupid idea. Funnily enough, you know who the founders are of OnLive? It's the web TV guys from Microsoft. The company Microsoft bought to build their first set-top box was founded by the same guys who have the OnLive service. So they're not gaming guys, they're video guys.

The mistake they have made, which is fatal, is that they've solved the video delivery problem – the image part, that can work. So the thing they understand best I look at and go, "I'll be damned, I actually believe that works. That was tricky, yeah." But there's no solution to this other stuff that they're kind of dismissing, and because there's no solution they're going to have a bad time getting their VC's money and it's a shame because I'd like to see it possible for it to work, but it's just not. Save this recording, put a time stamp on it and call me in five years and I can say I told you so.

You know, the VCs, people who aren't engineers, haven't really built all this technology, the story sounds good, it sounds kind of plausible, the demo kind of works, and without a really deep understanding of how these things are built it's not obvious to everyone for a while until the money goes away.