Sure. I do agree with you for sales it is better to drop the price than to increase the storage. It will only be a matter of MS satisfied with the sales curve or needing to reduce the price to meet it. If they are satisfied and want to just revamp while having more profit they'll double the SSD size, if they aren't then they cut the price while keeping the SSD size. But I have no doubt at one point before the end of the gen we will have the Series S or equivalent with a 1Tb SSD and Series X with 2Tb.

I'd say that any rumors about an upgraded system slated for release 3 years from now are just plain bullshit. There's a good chance that it will come true, but there certainly isn't any firm plan for something like that at this point.

I think what is most likely to happen is a series S price drop, and the introduction of a series X spec machine without a disk drive. Eventually the series X will drop in price to be the low cost machine, and there will be an upgraded version with higher specs than the current series X.

MS talked in the middle of last generation about an end of generations. They had to move off of that because they needed a clean break from their relatively lackluster Xbox One sales. But, I do think it's very likely that this is the last clear new generation of consoles from Microsoft. From here it will just be price drops of the existing machines and introduction of higher spec models at the top of the price spectrum.

I do think it's likely that the current series X is the last machine that they will release with a disk drive. Maybe there will be one more, but we are definitely near the end of that, for better or worse. 

If MS really goes out of gens then you can expect a HW refresh from them every 2 or 3 years but sure support for like 3 "gens" at a time. But yes I agree these rumors is just based on nothing but general schedule of HW and most likely will come true even if there was no information really leaked.

That would be a shame (no more disc drive). There are still many parts of the world with limited internet and even though my internet is fine, the lower storage this gen has only made physical releases more important to me. Plus I use the consoles as (4k) blu-ray players as well. If the Series S had a disc drive I would have snapped one up for my home theater (1080p projector).

It's just easier to delete a game knowing you can simply install it from disc again without having to rely on available bandwidth. At least for those that don't have insane patches.... My PS5 is full already and I guess yesterday evening the check for updates cycle came along. 5 minutes of messages, can't update ... free up space. Where do I turn that off. (Some could update, some could not, stupid copy entire game nonsense, and why does almost everything have a patch)

Anyway, I imagine at some point game developers will want to move away from baked lighting/shadows/reflections and use HW ray tracing or some other new techniques only, to ease development and file sizes. We're not at the end yet of only getting more incremental updates, at least one more generational hardware change will happen leaving software based (or rather preprocessed storage based) solutions behind. It will take a while just like the transition from software rendering to GPU. For now console HW ray tracing is in the early 3D card stage, Voodoo 3DFX (1996). Not quite at the GeForce 256 level yet (1999). UT2004 was I think the last game that still offered software rendering (not requiring a GPU)

Surely you'd just retire the Series S when the Series X gets a refresh and then the series X will just become the new S?

RND for only 1 new machine instead of 2.

The leaker that this thread is based on just gained some credibilty as he was the first to leak the codename Bergamo and it would have 128 zen4 cores that would be dence/compact. It was just revelead by amd.

He's claiming we will see a more powerful Xbox series S refresh next year that will be more expensive than the normal xbox series s. And than speculates based on his source that Microsoft could use exisiting Xbox series S chip with higher clock speed and all CU's enable. Myself think Microsoft would just make a new chip based on zen3/rdna3 using tsmc 6nm and use this for xbox series S refresh, this would make more sense.

Note that the original Xbox series S will not be discontinued but receive a price cut.

In theory I have a good internet, but in reality when I first started my PS5 and it asked for a 1Gb update it took almost 1h to download. Even though 2 days later it downloaded a 50Gb game in like the same 1h.

That makes sense from a western world viewpoint.  But the long-term future of the Series S may lay in India, Brazil, and similar, where incomes are much lower and/or import costs much higher.

Surely even easier still to buy a huge, inexpensive USB HDD and just shunt games off to that?  I think you can support something like up to 8 GB of external drive space on the PS5 and up to 32 GB of external drive space on the Xbox Series consoles.

Yup, waiting until manufacturing costs drop a little and releasing a discless series X makes more sense to bride the gap. 

Tbh, even that could be counter-productive to the series s. Does the gap even really need to be filled? Sony seeks to sell the full price disc version for a reason.