^^
By 2011 PS3 will already be able to sell at less than $200, so it would be in a market and segment different from newer gen consoles, more similar to what was PS2 at XB360 launch.
But as I wrote, there are more immediate dangers than Sony for MS: Nintendo could currently do what it wants with living room computing market, and if it reckons it's lucrative, it will grab it. And MS can't really do anything right now, only weakening Wii first it could counter Nintendo moves with some hope of effectiveness. And Wii won't get weaker until a very large majority of households will already have HDTV's, so anticipating too much XB720 would leave it defenseless to the fury of Wii in the immediate, and after, to be superseded by a more powerful and less expensive PS4 released later in HD market.

The Cell flaw is this. By having basically 2 different CPUs (Main CPU and then the SPEs) the PS3 developers have to deal with 2 instruction sets. As a software developer I know that the most difficult thing to deal with is parallel programming. Today very few applications really take advantage of the multi-core CPUs that are the norm. So Sony made something difficult even more difficult and Sony is not a software development tool maker either.

You can call developers lazy if you wish, but time is money and a more difficult platform simply extends the length of a project and makes finding talent more difficult to find.

2012 sometime. It would be stupid releasing a new system in a recession. The ps3 can last until maybe 2014.

@thx1139:
I don't call them lazy (*): Sony will have more games fully exploiting the Cell only releasing better tools, otherwise only the biggest projects would justify the greater efforts. Obviously also bigger (or reserving more of their funds to R&D) SW houses that license to smaller ones their engines and libraries can help too as they improve them.

(*) I wouldn't dare to, I'm persuaded the lazy ones would be even with good tools, so what matters are good ones that cannot fully exploit features difficult to use due to deadlines, not out of laziness.

When it launched in Nov 2005, the X360 cost $400.

Now it's March 2009, and it still costs $300.

So only a $100 drop in price in three and a half years! And it has just reached it's peak year saleswise (and what a great year so far).

This should tell us something. That generations have become longer. I don't think MS can launch a new console for $400 in 2.5 years from now (Nov 2011) when the X360 Pro still costs $200.

So Nov 2012 is more likely for an Xbox 3.

November 22, 2011.

I think it will come out early fall 2011.  It will be announced at E3 2010. 

11/20 2011 xbox 1120 will be released

There won't be an announcement for a new console until 2010 or 2011 at an E3 press conference where they will showcase the look and technological capabilities of the console.

Microsoft themselves said they expect the 360's lifespan to reach 2015, so my guess is a new console will be ready for retail by 2012. Add a year for marketing and development of 1st and 3rd party games and software. 2013/2014 bracket will see the launch of the new Xbox. Its the perfect time, most people will be in position to invest in a new console and the Natal technology will pave teh way for the next level of games.

-U-

/7/7/7 Someone doesn't know how busines woooork /7/7/7

SCE is a subsidiary of Sony and as such extra profits from the division eventually end up consolidated on the holding corporation. SCE doesn't have those 2 billions leftover from the PS1 era under Ken's old chair.

Since SCE's "big bro" Sony is bleeding money, they can't pour money from above to help them get over the dire situation they are in - they just cover the losses and pressure SCE's execs to turn a profit ASAP so SCE can start contributing again to the general welfare of Sony.