At the Game Monetization conference in San Francisco, Wedbush Securities managing director Michael Pachter presented his thoughts on the directions that the gaming market is headed, updated with the latest data. As always, Pachter isn’t shy about stating his views of the future. “I want to help you think about the next ten years,” he declared, “in a way you probably haven’t thought about it before.”

Pachter began by noting the size of the North American market, because that’s readily addressable by Western publishers “The market is BIG,” he noted. Pachter’s figures indicate a total of about $25.8 billion this year, with $17 billion of that digital and $8.9 billion in physical retail. This includes console, handheld, mobile, handheld and desktop. “I actually don’t think with the next-gen consoles out the physical segment is going to shrink any further,” Pachter said, but the digital segment is growing strongly and will continue to do so. “Consoles probably grow modestly, but the digital piece grows dramatically,” he added.

The expansion of free to play games has helped expand the audience, and contributed to a drop in average prices for games. “We’ve had prices coming down, with on the digital side hundreds of millions, maybe billions of people playing games for free,” Pachter said. “That brings in diversification, with a lot more devices to play games on. I honestly don’t think this industry thinks about devices correctly. Your phone and your tablet are going to become consoles.”

“A lot of people scratch their heads and say, ‘What the hell is Amazon doing with Fire phone, Fire TV, Fire stick, the Kindle,” Pachter said. “I honestly think Amazon is the only company in the world that gets this. Amazon understands there is a gigantic market out there.”

“The console installed base is not getting any bigger,” Pachter said. “We’re seeing digital migration, even on consoles people are playing Bejeweled. You’re see a crossover of demographic – people are playing games on consoles they didn’t used to play, and they’re still playing these games on their phones and their tablets as well.” Pachter doesn’t think we’ll be able to measure the digital market all that accurately, not compared to how well retail sales have been measured by NPD.

Pachter compared his estimates for the new generation of consoles with the last generation, and concluded the overall size of the console market will be about the same. “The Wii U is going to sell 20 million units where the Wii sold 100 million units; the PS4 is going to sell 100 million to 120 million units, probably; the Xbox One will sell 100 to 110 million,” Pachter predicted. “When you add all that up, the next generation of consoles is 240 to 260 million, and last generation was 260 million. So it’s not a growth industry. For everyone in this room not chasing that market, you’re going to be fine. The market is going to get a lot bigger, just not on console.”

“I think it’s the last cycle” for consoles, Pachter noted. “Because you’re not going to need a console to play a console game.” He sees the power increases of mobile devices continuing so that in a couple of years they will have plenty of capability to play console games. “I think consoles are irrelevant in ten years,” Pachter said. Of course, what Pachter isn’t explaining here is that this depends on what you mean by the term “console game.” If by that you mean a game that’s deeper, more complex and engaging, then it’s not so much dependent on whether or not a console can push more polygons than a mobile device.

Certainly game publishers are looking to attract “core” gamers to mobile titles — the wave of games like Hearthstone and Vainglory are merely the latest and most obvious examples. Yes, it will be hard to equal the massive amounts of data that some of the latest AAA games include (many well past 25 GB) on a mobile title. But that limitation could be overcome by streaming parts of the data, or merely providing it in smaller chunks. Designers can certainly work around the limitations of mobile devices to provide deeper game experiences, and they are already doing that. The question then becomes how rapidly that portion of the market will develop, and how it will impact the console market.

Pachter sees a Sonos-like service that will connect your TV to a PC, smartphone, tablet, or the cloud, and games will be played the same way as before without a console. Of course, you’ll need a controller, but that’s getting easy to find. Activision is even providing a controller with its version of Skylanders: Trap Team for tablets, and at the same price point as the console version of the game (the tablet version is identical to the console version, too). Pachter considers this a brilliant move on Activision’s part.

“This is disruptive, and expect to see Microsoft and Sony fight back with even more functionality,” Pachter noted. He sees the big publishers getting together to provide network functionality collectively for multiplayer games across devices, similar to the way National Cinemedia displays ads in theaters (that company is owned by three of the big four theater chains). “Activision/EA/Ubisoft will do the same thing,” Pachter said. “It will be three to four bucks a month to make multiplayer available to all. Amazon Web Services will host it.”

Certainly the publishers have long wanted to allow players to connect across devices. Activision would love to see all Call of Duty players able to compete against whoever they want without regard to whether the other player has an Xbox or a PlayStation or a PC. Or perhaps, in the future, a mobile device. Unifying that audience should mean greater engagement among the players, and that translates directly to higher revenues for the game publisher.