Honestly, beyond the obvious updates to PS Now, like better resolution, less lag, and more 3rd party games they don't need to do anything. As long as PS Now offers a library similar to Gamepass, they will be competitive. Stadia will flop so long as you have to "buy" your games. That's like having a Netflix where you have to "buy" your movies full price. So it will just be a competition between Sony's PSN and MS's Gamepass. The differences between these two streaming platforms will just be exclusives. But MS has gotten to the point where their exclusive games just aren't worth much anymore. They inject MTX into the Gears, and Forza series. They are likely to do the same with Halo Infinite. Their games fail to evolve while Sony and Nintendo continue to push the envelope.
So we'll have Gamepass with exclusive games that are either bad, stagnant, or MTX infested vs PS Now with a couple three to four year old exclusives making the PSN list. Kind of like how Bloodborne is on PS Now.
As far as local hardware becoming obsolete goes, do you expect game graphics to stay the same? Playing locally will always be superior to playing via streaming, because as consoles get more powerful the data demands will continue to grow. And ISP providers will continue to be more scummy with data caps. And 3rd party games will become even more infested with MTX to the point where those games are pretty much worthless. So consumers will have a choice between paying $500 for a console with MTX-free, quality games, or paying $10 a month for streamed games with lag, data caps, and enough MTX to make playing the game grind free, a $120 investment.
