For console gamers, there are few things as exciting as witnessing the newly revealed capabilities of a new era of gaming machines. But it’s something that we’ve seemingly – and uncharacteristically – been deprived of at this late stage in the current generation’s life cycle.

As the latest batch of sequels with incremental improvements and refinements rolls around for PlayStation 3 and Xbox 360, many players have begun to yearn for something extra, something revolutionary, something novel – something that’s likely not possible on existing systems.

There was once a time when, in a similar fashion to Moore’s Law for computing, the life span of any game console hardware could be accurately predicted based on previous cycles. Almost like clockwork, all hype and developer interest in the systems of the time appeared to fade away after roughly five years, coinciding with the announcement and imminent release of its successor. From the Nintendo Entertainment System, the Mega Drive, the PlayStation, right through to the introduction of this current generation – it’s been a fairly consistent and accurate cycle; successors have reared their heads after about half a decade. Presumably manufacturers felt consumers were ready to throw down more cash on newer hardware after this amount of time.

The current generation bucks this age-old trend. The Xbox 360 is well into its sixth year, with the PlayStation 3 (released roughly 18 months later) nipping at its heels in the longevity stakes. In itself, this is no cause to declare that the sky is falling, but with nary an official word spoken of a successor for either platform – and with rumours we won’t hear of one for at least another year – it's evident there’s been some kind of sea change.

I spoke to two well-known industry analysts to find out why.

Bigger and better currently makes no financial sense

Michael Pachter, Wedbush Securities’ managing director of equity research, has established a reputation as one of the gaming industry’s foremost commentators when it comes to hardware and software trends. He’s not always spot-on with his predictions, and he’s known for revising his forecasts and reserving the right to do so. He once famously claimed that Rockstar’s Bully would turn out to be a failure and that chances of a sequel were unlikely. He eventually apologised for the former, admitting inaccuracy, but it seems that he was on the money regarding the latter. On another occasion, he was once vilified for projecting a US$50 price cut on the Xbox 360; it eventually came into fruition some five weeks after the date initially predicted.

Fortune telling has never been an exact science, but it seems the grey area inherent in many of his predictions has not left him with the best reputation in the eyes of forum-trawling gamers. Nevertheless, his strike rate must surely cause even the most sceptical to acknowledge his insight into gaming trends.

In 2004, Pachter made a dramatic call: this current generation of consoles would be the last. In the latest edition of "Pach-Attack" – a video segment in which Pachter addresses viewers’ questions about the industry – he recounts a similarly bold revision to this call that he made two years ago concerning the likely release of a new console generation.

“I was asked when I thought the next consoles were coming out, and I said 2013 or 2014, and everybody laughed in the audience,” he muses. “And there were two other analysts on the panel – I won’t name them – who said I was crazy, and said they were coming out 2012 at the latest. And here we are, halfway through 2011, and obviously no new [Xbox or PlayStation is] coming out next year.”

Before this episode of Pach-Attack was published, I picked Pachter’s brain about this very topic. I asked him what was behind this seemingly spot-on prediction, and what made this generation different to except it from the traditional pattern.

“The biggest reason for the length of the current cycle is that we are approaching the point where further returns on investment aren’t possible,” Pachter states matter-of-factly. “The human eye can see frame rates faster than 60 [frames per second] and can discern textures at higher than 1080p, but the differences are relatively small above those levels,” he continues. “Somebody could make a console with a 240/second frame rate and output at 8 million pixels, but to do so would require a very fast microprocessor and an expensive graphics card, coupled with a new monitor that can output pictures at those specifications.

"That would entail a very expensive set of hardware, and to illustrate the game at that level, development teams would be huge. Thus, games would cost a lot more and take longer to make, while hardware would be prohibitively expensive.”

Certainly as the cost and the investment in development grows, the consumer’s unwillingness to spend above and beyond the current prices for hardware and software remains unchanged. However, Pachter’s argument that we’ve hit a veritable ceiling in terms of technical capabilities is flawed. Neither of the two main consoles take full advantage of the frame rates, resolutions and 3D features already possible on current HDTVs. In fact, gamers with HDTVs are unequivocally better served by their PCs for living-room gaming performance. That’s not to mention the shopping list’s worth of respective weaknesses each console has that are surely to be plugged in the next iterations.

So while the investment in hugely superior technology may not necessarily be financially worth it for the key players right now, the potential technical capabilities of consoles have certainly not hit a wall.

It's easy to understand the apprehension of key players when it comes to investing in next-gen tech, particularly when appreciating the fact that the best-selling machines in recent years haven’t been the most technically capable. Nintendo’s Wii – an inferior console to those from Microsoft and Sony when it comes to specifications – has outperformed its peers, almost achieving the combined lifetime sales of both of its competitors, with over 87 million units shipped to date. This is despite the fact that it launched in the same period as the PlayStation 3 in November 2006. Consequently, Microsoft and Sony are now showing signs of anxiety and uncertainty about the nature of the next gen.

“It is not clear that there is sufficient market demand to justify such an investment,” continues Pachter. “No console manufacturer has indicated a willingness to be the first, and over-engineering its PlayStation 3 put Sony in a hole this cycle, so nobody wants to be in the same situation next cycle.” As for Nintendo’s upcoming offering, Pachter dismisses the Wii U as “...merely a catch-up to the current generation with an integrated tablet”. And it seems that, with neither of its direct competitors in any apparent rush to kick start the next wave, playing catch-up may not nearly be as dangerous a strategy for Nintendo as many first feared immediately following E3 this year.

For another perspective I turned to David Riley, executive director of the NPD Group. The monthly software and hardware sales figures cited by most of the mainstream gaming press are based largely on the sales-tracking data compiled by the NPD Group, so he is in a unique position to provide insight into industry trends.

While he largely echoes Pachter’s sentiments, he adds that consumers appear to be content with the current crop of consoles. “The asserted life cycle for current generation home video game consoles, Xbox 360 and PlayStation 3, is said to be 10 years, which doubles the lifespan of previous-gen platforms,” begins Riley.

“Whether this 10-year cycle is true or not is anybody’s guess, but it’s apparent that both manufacturers have learned to maximise the life cycles of their products. The technology contained within the Xbox 360 and PS3 gives developers the ability to create games that rival anything available on a PC, yet developers are far from truly testing the limitations of these platforms.”

No doubt there will be many who disagree with that last sentence. The days where a console multi-platform title could toe it with its PC counterpart are well and truly behind us. It’s for this reason that EA has opted to lead with PC for the upcoming Battlefield 3, scaling back many of the graphical features, map sizes and player counts for the console ports. And it’s a tack that more publishers will follow should Sony and Microsoft continue to prolong this generation’s lifetime.

Riley also contends that the “home entertainment hub” aspect of current generation consoles pushed by both manufacturers – their increasing usefulness for media streaming and other activities besides gaming – means that this generation is a completely different ball game to those before it. This is true (and truer still abroad); consoles are no longer strictly targeting core gamers, and that’s something that’s going to affect the level of investment of their respective install bases.

“Keep in mind that these particular platforms offer services that go beyond traditional gaming, which also adds to the extended life cycles,” explains Riley. “Considering the growing installed base for Microsoft and Sony’s respective platforms, I don’t see any danger in not rushing out with a new product. Why try to fix something that isn’t broken?”

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