I was just reading an interesting post by Bruce Everiss, of Bruce on Games (http://www.bruceongames.com):
He references the director of XBox product management, who said that there is no need to launch a new console any time soon:
<blockquote>The second worrying pronouncement comes from David Hufford, senior director of Xbox product management, who was also at CES. He told the Guardian: "There is no need to launch a new console, because we’re able to give this console new life either with software upgrades or hardware upgrades like Project Natal. The Xbox 360 was designed for a long life, and I don’t even know if we’re at the midpoint yet."</blockquote>
Bruce then goes on to say that due to Moore's Law, the assertion that Microsoft can just ride on what it has is false, because it won't be able to keep up in terms of processing power:
<blockquote>This is in total denial of the beating heart of game platform history, Moore’s Law. This says that the number of transistors that can be put on a chip doubles every two years. So, for a given price, a game console can double in power every two years.</blockquote>
Beyond this assertion, there is one other simple reason that they can't depend on this: Natal hardware does not come with the XBox 360. Developers are much less likely to develop for Natal because the market that uses Natal hardware is quite small. This feedback loop ensures that not many people will use or develop for Natal until a critical mass has been reached. This is the same reason that the Wii and Gamecube before it had a bunch of games that supported more than two players: the system supported it out of the box. Developers and producers could rely on the cost of entry to have more than two players playing their games to be quite low – all your friend would have to do to play is bring more controllers. Contrast this to the Playstation, where an adapter was needed to have more than two players play at once. How can Microsoft fix this? Release a new console which has Natal and other things that you want games to use as standard equipment. If it's not standard, it won't be developed for nearly as much.