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Squilliam said:
I think of it not as a completely new system, just an xbox 360 with hugely updated technology. If it's true that is. The Xbox 360 will become the equivelent of the PS2 for Sony. It will be the value offering and the Nextbox would be the PS3 killer. Think all the games the Xbox 360 MAY not be able to handle + a few exclusive/PC ports that the PS3 cant handle + All multiplat games being rendered at 1080p@60 with 4-8xAA. It's all old-hat for a PC gamer.

Hardcore gamers are the ones that would update to the latest and greatest. Who wants to be stuck with the old technology? Microsoft may be a software company but they are also a Computer company, so more frequent updates are the way they do their business. 6 years is TOO long between consoles. You've lost the first few years due to it being too darn expensive with no games anyway so why not cut those out and get to the chase? IF you can buy 2-3 systems, you surely can afford to buy the latest system when it comes out. I argue that the problem is that Sony is a TV company. Too used to long model life. :)

Consider these things also:

1. Fast releases was how Nvidia BURIED 3dfx.
2. More frequent releases allow you to be more flexible to change to market demands and target new areas first.
3. It's not easy being the middle system. You're either not powerful enough or not cheap enough.
4. All is fair, it's not like Sony discontinued the PS2 when the PS3 was released now was it? Think of this in the same way.
5. An Xbox360 today is still just as good if the nextbox is released tomorrow. It's just that if you want a more powerful system the nextbox is better. The value of the 360 doesn't change at all.
6. Mistakes aren't so deadly. You don't have to lament mistakes for 6 years between consoles.
7.The latest and greatest gets all the press. IF the Xbox360 had one year and has done decently with RROD hanging over it. Think of how well the nextbox could do if it had TWO years to establish itself?
8. The PC is Microsofts greatest strength. Why not use it? Frequent releases mean that they can leverage TWO consoles and the PC platform to create a powerful synergy.

I can see a future with gaming over IP, but I just don't believe it is that close.  I feel like the communications guys are saying they could have it in place by 2009 or 2010.  I don't know that the feeling is reciprocated.  Plus bandwidths just aren't there in America yet. 

In response to a few things:

1.  Relatively few things transfer over business lines.  Look at the Sega line of consoles.  Too fast, industry wouldn't support it.  The biggest difference is that the graphics card business, you can make a profit by selling 100,000 cards if you plan it right.  There would be no game support for a console if it can't sell enough.  Additionally consoles have sold at losses to recover the profit through games.  If we start replacing consoles faster, expect to see the $800-$1000 prices that the 360 and PS3 should have cost.

2.  More flexible releases are what has kept the PC gamer market niche.  Console gamers love the ease.  Don't have to check specs, don't have to update.  Just go pick up a PS2 game and I know it'll work perfectly (or as good as coded).

3.  360 isn't a middle man.  They have the best online system and are the cheapest HD graphic entrant.  They may not have positioned themselves the best, but people forgave them giving up on the Xbox very quickly.  I don't know if that will happen with their next console if this is a trend.

5.  No an Xbox360 is not the same value if another console is released.  Part of the value is the next 2-3 years of new game releases.  I mean I bought a pentium 200 for $1900 back in the day.  I'd be lucky to get anybody to want it let alone give me something for it.