I think there will be an XBox 2 (or whatever they call it) for fall 2018. They're already hiring for hardware engineers for the next-gen XBox so I don't think software only is in the cards.
4K resolution, a fat wad of HBM2 RAM, 14nm GPU, the works.
5 years is a normal product cycle, especially since the XB1 has virtually no shot at being the market leader.
And yeah sure I think there will be more integration with Windows and the PC side and MS will probably try and push a Steam-meets-Netflix type subscription model under XBox Live's banner. But there will still be a physical console.
The only reason the last gen went on so long is because Sony/MS lost so much money at the beginning of the generation that they needed the extra 2-3 years to recoup as much of those losses as possible.
XBox One hasn't had any issue like a billion dollar recall for RROD, so it doesn't need a 7-8 year product cycle.
A one year headstart would do wonders for MS, it worked for the 360, they will probably try it again.
