Easy.

1: Due to lack of confidence, investors oust Iwata and replace him with a businessman. Nintendo's new President and CEO shuts down Nintendo's hardware R&D. All future Nintendo software is to be developed for other hardware, primarily mobile devices. (Just think how much money we'll make turning Animal Crossing into a "free" game with rampant IAP on iOS and Android!)

2: As has already been suggested by Sony, the Playstation 5 is more of a digital platform than a piece of hardware. Sony no longer makes game consoles, they make smart tvs with PS5 software built-in. But PS5 isn't Sony tv exclusive, of course in order to reach the largest market possible it is simply a program that can be run on any smart tv, computer, or mobile device. Since PS5 runs on mobile devices, of course all of its games will be developed with mobile play in mind. It would be financial suicide to make a big-budget game that can only run on a fraction of your target market's hardware!

3: Windows 10.

Remember when I said "All future Nintendo software is to be developed for other hardware, primarily mobile devices?" The reason Nintendo games will be made primarily for mobile devices is because there is no other hardware in this future. Computers, smart tvs, and mobile devices all use the same operating systems. This is already happening.

Done. All games are now developed with play on mobile devices specifically in mind. Hope you like touch controls.

I immediately thought:

Smash Bros. - All-Stars x Microsoft = Master Chief & Friends ENDLESS MURDER Picnic  OF DOOM. 

I don't have too much faith Microsoft could balance being fun fo everyone, suitable for kids, and secretly making the player unknowingly conduct satanic rituals the way Nintendo EAD can.

I am curious how you think Microsoft would foul that up though.

Forgive the likely double post, but you win. Completely and thoroughly. Ô_Ô

Console industry could easily crash, its just in a ok place right now.

Don't forget about Activision!

How i see it. It needs to happen in this order.

1- After being dominated by the PS4, including USA, MS will get rid of Xbox brand and assets. No one will want to buy the whole game division, so it would most likely be dismembered among other major players (EA, Ubisoft, ACTVI could buy the dev teams, while the infrastructure goes for some one else).

2- Despite the absence of MS, most of that demand would be absorved by PS4. Like Psyduck said, Iwata would stay discredited and would be replaced for some one who would give up hardware and go mobile /third party.

3- Finally, PS4 would crumble under SONY weight, its success being far from enought to hold the massive company and their liabilities.

That would be the end of consoles at least. It needs to be in this order because
1) If SONY flops before MS, MS will stay
2) If both of them get out before Nintendo, Nintendo could face a resurgence

The average gamer will buy inito anything journalists hype. If the journalists don't hype anything they don't have a job, so the video game industry will stay alive regardless how much crap comes out of it.

Colud face? LOL. If MS and Sony died all the companies would go to Nintendo if they want to stay in business. There be no choice but to auto win. No more kiddy image, if you got every FPS game.

MS sells a major stake in Xbox and is bought and run by idiots. The Xbox platform goes up in flames and after a fling with failed 3rd party releases of Halo and Gears, the Xbox brand goes the way of Atari

Sony's next console has PSNow requirement and other weird stuff. Due to pressures of other failed business ventures, Sony can't produce as many great games. Failed triple A titles. Failed VR initiatives.

EA, Activision, Ubisoft, Square, and Capcom produce triple A titles that don't sell well. The business model becomes fundamentally broken because gamers don't want to pay for full retail or DLC. Key staff leave to join indie studios, but fail to garner the attention of gamers.

Retailers begin to diminish the market presence of Nintendo by allocating less and less store space. Co-branding for Nintendo no longer is a successful venture for other companies. Nintendo and it's brands fade into niche obscurity.

Kim Kardashian iPad game reaches 1 billion in revenue.

Very simple process to crash the gamer game industry. All that has to happen is two players finally decide to stop making hardware. It would quickly cause domino effect of power abuse and decline.