Where do profits come from in the traditional business model of video game consoles? What is the economic logic of this profit model?

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How structurally attractive was the videogame industry prior to the emergence of cloud gaming?  How does the emergence of cloud gaming impact the structural attractiveness of the console gaming industry?

 

Where do profits come from in the traditional business model of video game consoles?  What is the economic logic of this profit model?

 

What are the new pricing models made possible by cloud gaming and what will be their impact on the traditional pricing model?

 

Should the console makers:
a) embrace cloud gaming (aggressively roll out cloud gaming features, including streaming), or
b) stay the course with console gaming (adopt a “slow and cautious approach”,  with minimal adoption of cloud gaming features)?

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