Microsoft is developing Project Natal plus new software and content services to prolong the life of the Xbox 360 games console, rather than introduce a new machine

We all know that the games business goes in cycles and that a new generation of consoles always comes along to replace whatever is popular today. In fact, we should now be talking about the Xbox 720, Sony PlayStation 4 and Wii II, or whatever they might be called, because game developers need a couple of years to create new games to exploit the new hardware capabilities that justify the launch of a new generation. But we aren't, and Microsoft doesn't want us to.

"I think it's important to say that the Xbox 360 is the console of the long future for us. There is no need to launch a new console, because we're able to give this console new life either with software upgrades or hardware upgrades like Project Natal," said David Hufford, senior director of Xbox product management in a briefing at the Consumer Electronics Show in Las Vegas. "The Xbox 360 was designed for a long life, and I don't even know if we're at the midpoint yet."



Rather than release a new console, Microsoft is developing Project Natal to enhance existing systems. At a CES keynote, Xbox boss Robbie Bach said Natal will be released for the 2010 holiday season, ie in the run-up to Christmas. Hufford said the team had demonstrated at E3 that the technology worked, and now "we've asked the development teams to concentrate on making the games."

Hufford said that the Xbox 360 did not need an upgrade to support 3D games -- "Avatar is on Xbox and we have a 3D game, Scrap Metal, in our booth right now" -- and nor would he commit to offering a Blu-ray drive. Indeed, I couldn't even get him to speculate about moving the 360 forward to a more modern chip technology. This would reduce the Xbox's manufacturing cost and also produce a console that generated less heat and cost less to run -- benefits that have already accrued to Sony with the launch of the PS3 Slim. It should also be more reliable.

"We love our prices right now," said Hufford. "I don't want to say that technology stops, but we believe we have a high quality console, and we stand by that quality with an unprecedented warranty, so we think we're in a good place now heading into the Natal era."

Microsoft is clearly working on the software and content parts of the Xbox with the Zune movie service, support for social networking, the Gameroom of classic arcade games, Mediaroom TV services, Project Natal and so on. It's not looking to launch new hardware.

This makes sense because new consoles typically sell at a loss, and the system only becomes really profitable in the later years as manufacturing costs fall and sales of high-priced software mount up. Sony, of course, is in the same position but worse, because it's still selling PlayStation 3 consoles at a loss, and will need several profitable years to get back its huge investment.

So what has changed?

Most console wars result in a big win for one player -- Atari VCS, Nintendo NES, Sega Mega Drive, Sony PlayStation or whatever -- with the others failing. This encourages the failing companies to move to the next generation first to get a competitive edge.

This time around, the three major players have all achieved viable market shares. Perhaps there's no incentive for any of them to start a next-generation console war, and Ken Kutaragi will have been correct in claiming that the PS3 would last a decade.

What do you think? Technology has moved on since 2005, when the Xbox 360 was announced. Will you be happy to have the same system in 2015?