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While the virtual machine code will of course improve, the later in the gen the games were released, the more demanding they are, so it makes me a bit sceptical to how, for instance, Halo 4 would run.

What could be really interesting though, would be if next gen, MS releases an official 360 emulator for PC (considering they are likely to ditch xbox next gen). Sell the software (the emulator) itself for 60$, and games for anything between 5 and 10 dollars a piece.