I've been lurking for a while, but decided to register because of a number of related discussions where I thought some relevent points are being missed. Rather than track down each discussion and explain the part of my thesis that is associated to the topic, I thoguht I'd put it all together in a new thread.

As the title implies, I think that this gen is going to last longer than other recent ones; in fact I think that seven years is a low estimate. The one caveat I make in this prediction is that no new players enter the console market in that time; if a new company comes storming in a couple years from now, everything I have to say might be invalidated.

If you look back at the history of generation changes starting in the mid-80s you will see that one company usually pushed ahead, forcing all the others to either update or be made irrellevent. First Nintendo with the NES, then Sega with Genesis, then Sony with Playstation, then Sega with Dreamcast, and most recently Microsoft with with the 360.  With that in mind here is a look at the three current players.

Nintendo

There seem to be a lot of people, especially hardcore gamers,  who seem to think that the Wii2 is just around the corner; this view shows an ignorance both of console history and of Nintendo.  First of all if you look at the list above of the companys that forced generation changes, you will see that the company in first place never forced the change.

Faulty assumption. There was no "forced" change. As one generation ends, each company begins R&D on their next console. They already have an idea as to when to bring it out, give or take a year depending on how they perform. The PS2 was coming out in 2000 regardless of the DreamCast, which was not taken as seriously as many of us would have liked.

The reason for this is simple - the company in first place is making tons of money and has no incentive to upset the current system. For that reason alone Nintendo would be unlikely to push a new gen unless they fall into a distant second. But even in second Nintendo won't force the generation change because Nintendo hates generation changes.  Nintendo had more incentive than any console maker in the past two decades to want the last generation to end - they were in third place, moving practically nothing, and knew they had a huge ace up their sleeve for this gen - yet Nintendo was the last to lauch this gen; in fact Nintendo has never been the first to launch except with the NES, which was their entry into the market.

You miss the concept of the Red Queen's Race - in business, a company that is ahead must innovate in order to stay ahead. Nintendo knows that it cannot be caught with its pants down next gen. The other companies have seen their success and are keen on duplicating it. One huge advantage Nintendo has this generation is that it is making a profit on the current hardware. While MS and Sony will need to stay in longer, at higher prices, just to offset their  console losses, while Nintendo has the luxury of being able to announce a new console whenever it wants. At some point the Wii demand will level off, and there will be price cuts, but the problem with starting with a low price is that there isn't very far to go. Moreover, as the other "Next Gen" consoles become more common place, and more HD tvs are sold, the more the market will become aware of Nintendo's technical shortcomings. Nintendo will end up being able to release a Wii2, likely with abilities superior to the PS3 and 360, at a low price, within a few years.

Sony

Its no secret that when Sony said that the PS3 would last 10 years, they meant that in 5 years the PS4 would come out and be their primary system (in the same manner that PS and PS2 have had production long after they left the spotlight).

However, I don't think that Sony could have ever forseen the position they are in right now financially. I think its fair to say that Sony was not expecting MS to launch the 360 in 2005. Sony probably expected the price of their components (especially blueray lasers) to come down in time for a late 2007 launch, but were forced to luanch when they did because they knew a two year lead for Xbox would be nearly insurmountable. So by launching a year earlier than they planned, Sony took on huge, huge losses.

Normally huge losses would be incentive for a company to end a generation, but I think in Sony's case it will be incentive to drag out the gen as long as possible. If the PS3 base continues to grow steadily, its conceivable that Sony will break even for the generation inspite of its start. And if the the generation goes on long enough after that PS3 could become quite profitable.

On the other hand, if the generation is forced to end prematurely, Sony will be in a huge pickle. Sony fans won't want to upgrade to PS4 if its just a baby step ahead of the PS3; Sony will be forced to create another loss leader just to compete with their own unit. But at some point the mother company or investors will say enough is enough. If the games division after a huge money losing PS3 says they are going to make a loss leading PS4, they will likely get the rug pulled out from under them.

So I think Sony will not end the generation till the PS3 has shown a good profit for the generation. PS4 development won't be a huge project for them till the PS3 is making enough to cover the R&D.

The problem with Sony waiting 7 years or more to launch the PS4 is that it is almost impossible to reverse fortunes after a generation is underway. While they have improved due to radical measures last year, they will still, essentially, be running a tight race with Microsoft for several years.  They cannot become number one this generation. In short, they have a losing hand, and their fortunes won't improve until a new hand is dealt. 

Microsoft

After everything I've just said, you might expect me to say that Microsoft is going to pull the trigger; after all they did last generation. Many people think that if the Xbox360 falls behind the PS3 that MS will just release the 720 in the same fashion they did the 360 - way, way, way before anyone would have guessed. Unless the XBox reverses current trends and not only wins the generation, but makes a good profit, I predict that MS will get out of the console business.

One of the biggest things that people seem to forget when talking about the future of the XBox is why it even exists in the first place. In the late 90s Sony was so dominant in the console business that Sony execs were talking often about how their real competition wasn't the N64 or the Saturn, but Windows. Sony was talking about how they intended the Playstation line to eventually include all the basic functionality of a pc and that they intended for Playstations to be in homes instead of PCs.

It all might seem a little silly now, but at the time it had MS really scared. At the time low end PCs were still going for more than $500, and there were still a lot of homes that didn't have computers or internet (and as such were seen as the best place for growth).

MS created the XBox to take the fight to Sony. Rather then let Sony leverage its lead in consoles to get it into the home computer industry, MS  decided to shake up the industry as best it could. Many an analyst has raised an eyebrow as MS has just thrown billions away in its XBox division. But in MS's mind the success of Windows XP can in part be attributed to Sony being kept out of the computer industry.

In the last ten years things have changed enough that Sony is no longer a threat to Windows ;PCs now sell for less than Playstations; Sony is no longer dominating the living room (and Nintendo seems to be quite clear that they don't want to do anything other than games); and Sony can't afford to engage in experiments till they have paid off the PS3 debts. In short, MS has no reason to be in gaming, unless they can make it profitable.

So my prediction for MS is that either they will be in a weak position, and just get out of the console market, or they will be in a strong position, and have no interest in ending this generation. (my money is on the former)

So, in summary, Nintendo won't end this gen in 5 years or so because Nintendo has repeated through its history shown an aversion to the five year cycle; if the other companys leave the power in Nintendo's hands, expect a 7 year cycle. Sony won't end this generation in 5 years or so because Sony can't afford to; Sony needs to get the PS3 in the black then bank the money to R&D the PS4. MS won't end this generation ever because the only way they are making another XBox is if they starting turning a big profit, and no company making a big profit ever ends a generation.