(Originally posted on Slashdot)
I think the demise of the joystick tracks the movement of gaming from a niche activity to the mainstream.
Specialized peripherals such as joysticks, driving wheels, trackballs, arcade knobs, and spinners are ideal for the specific game genres that need them, while gamepads (and on the PC, keyboard/mouse) are good enough in every genre while excelling in almost none of them.
The Atari 2600 was the first and last console to use a joystick instead of a gamepad, and that only because the gamepad hadn't been invented yet. If you look at the vast majority of Atari 2600 games, you'll find that they would have worked better with a gamepad.
So for inexpensive mainstream gaming, the default controller was always going to be something like a gamepad.
The PC, on the other hand, started as a niche market; you pretty much had to be a nerd to own one and be capable of operating it, and to game on one made you even more of a nerd. Marketing specialized peripherals to technophiles is easy. Marketing them to people who (as computers became cheaper and easier to use) bought computers for Internet connectivity and word processing and other practical purposes is considerably more difficult.
What's a joystick specialized for? Flight and space sims (including mechs). Some would say fighting games as well, though the preferred peripheral there is actually the arcade knob.
Those of us who enjoy flight sims sometimes have trouble grasping just how unnatural an act flying is for most people. The controls don't do what they would expect, and managing the flight envelope while trying to fight is just too alien.
And flight sims are complex beasts that require managing a myriad of controls and instruments. This is even true for some space sims - energy management in the X-Wing series is a good example. This begins to pass what most would consider play into the realm of work. Only the true fans will find joy in this kind of activity.
Joysticks have always been a niche market; it's just that PC gaming's earlier days were entirely the same niche market, so joysticks naturally dominated there. Now that gaming (both PC and console) is a more mainstream activity, game producers choose to produce games that target that mainstream, and one of the ways they do that is by making games that work well with the platform's default peripherals. That's why the last three significant PC space sims - Freelancer, Eve Online and Dark Star One - are designed for mouse and keyboard; the first two can't even be played with a joystick.
There is still a place for the joystick - committed flight sim fans will still want one (IL-2 Sturmovik, Pacific Fighters, Lock-On, Microsoft Combat Flight Simulator, and so on), it works well in games that have flying portions (like Battlefield), and games like Ace Combat 5 and 6 offered them as an optional add-on, but that place will remain as a niche peripheral for the forseeable future.