Honestly if Microsoft were to release new models every year or two with added functionality and games that would play better on the newer units. I would stop buying X-Box and go back to being a Nintendo only guy. Sure with X-Box I have bought two model's since launch, mainly because my first unit RROD and while Microsoft fixed it I didn't want to have the problem again so I bought a slim.
Chances are if Nintendo releases a powerful enough console that gets good third party support I will probably hold off on the next X-Box for a year or so, wait for the hardware price to drop (MS drops prices fast). If they announce a new model with increased functionality and appear to plan on doing so on a regular basis, then I will put off on an X-Box purchase all together.
I think it may work in the short run to increase sales, but Microsoft would get bit in the butt. Look what happened to Sega, developers didn't like it and neither did consumers. Constant upgrading will not be tolerated in the console market. Look at the DS for example DS,DS:L,DSi,DSi:XL all the models offer slight upgrades but a game on DSi:XL will play just as good on DS. If Microsoft made future models have features that made games playable better on newer model's, consumers won't be happy. Essentially the X-Box would become a PC.
Gamers aren't going to shell out hundreds of dollars to see a new model come in a year demanding hundreds more, then another model the next year and so on. Apple's strategy would not work in the home console market, infact I doubt it would even work in the handheld console market.
-JC7
"In God We Trust - In Games We Play " - Joel Reimer
