THESE days video games rival films as a form of entertainment. Sales figures are murky, but most estimates put annual revenues at between $60 billion and $70 billion. So the launch by Sony, on February 20th, of the PlayStation 4, its latest games console, was appropriately full of razzmatazz. Those attending the launch in New York were treated to a dazzling light show and images of goblins and ice goliaths from games for the new gizmo, which goes on sale towards the end of the year.

Away from the glitz, though, the console industry is having a torrid time. According to NPD, a firm of analysts, sales of consoles and other hardware fell by a fifth in America last year. Sales of the games themselves are doing no better. Both Sony and Microsoft, which makes the Xbox, a rival line of consoles, have reported falling income from their games divisions.

One reason for the gloom is that existing consoles are long in the tooth. The Playstation 3, Sony’s flagship console, is more than six years old; Microsoft’s Xbox 360 was first released in 2005. In the neophilic world of video-gaming, both are antediluvian. By waiting for new systems, consumers may have depressed sales of existing, soon-to-be-obsolete ones. And economic stagnation has been hard on the young men who have long been the most enthusiastic video gamers.

Others think the problems run deeper, and that consumers are abandoning traditional video gaming for cheaper alternatives. Games designed for smartphones and tablets are booming. In 2012 the ten top-grossing apps for Apple’s iPhone smartphone were all games. Many mobile games are free; those that are not sell for a handful of dollars compared with $60 for a big-budget console title.

Meanwhile, other companies are experimenting with streaming games to consumers directly over the internet. That allows the complicated number-crunching to happen remotely, freeing users from the need to own anything more than a television and a controller. The growth of these sorts of games—and persistent rumours that firms such as Apple or Google may make a co-ordinated push into the living room—have persuaded some analysts that expensive, stand-alone consoles such as the Playstation are doomed.

Such gloom is almost certainly overwrought. A game designed for a smartphone with a tiny screen is not really comparable to one played on a 40-inch television with a powerful, dedicated computer. And Sony’s PS4 boasts plenty of social features, such as one that lets players share videos of their gaming exploits with friends at the click of a button. Still, its launch was surprisingly vague, omitting minor details such as what the new console looks like and how much it will cost. Nor did Sony spell out how the PS4 can provide entertainment beyond gaming.

The battle for the living room is heating up, as the Xbox and other gadgets seek to become hubs for connected homes. It is a game Sony cannot afford to lose.