The Third Xbox is in Development!

Microsoft has recently started posting job offers to engineers. The way the job descriptions describe the situation, it appears obvious the jobs will be focused on the design of the successor to the Xbox 360. But several analysts have pointed out that since Microsoft hasn’t even determined which parts will be used in the third Xbox, it means the Xbox 360 has a lot of life ahead of it.

This seems particularly true when you consider Nintendo will be releasing the Wii 2 console in 2012 to be a direct competitor of the Xbox 360 and PS3 consoles. Obviously, Nintendo would not want to release a Wii 2 console that would see vastly superior competition just a short time after its release. Let’s assemble the facts so that we can try and come up with a fact-based theory.

Here is a list of facts we know so far:

* Nintendo recently announced the Wii 2 will be released in 2012. The Wii 2 will not be a direct competitor of the PS4 or the third Xbox. The Wii 2 will be the direct competitor of the Xbox 360 and PS3. I wrote an article about this here, and another article with additional information here.

* The hardware specifications of the Wii 2 show it will offer performance similar to what is used by the Xbox 360, PS3, and PCs of today. Wii 2 uses 512MB of RAM, just like Xbox 360 and PS3. Wii 2 uses a GPU that is nearly identical to the one in the Xbox 360. The same can be said about the 3.0Ghz tri-core CPU used by the Wii 2 compared to the 3.2Ghz tri-core CPU used by the Xbox 360.

* The third Xbox currently rumored to be in the very early stages of development will obviously not be competing directly against the Wii 2, since that would mean it is competing directly against the Xbox 360.

* Nintendo feels confident enough to release the Wii 2 in 2012 because they believe the eighth generation of videogames represented by the Xbox 360, PS3, Wii, and Wii 2 still has a lot of life in it.

* Sony said the PS3 will have a 10-year life expectancy. If this is true, the PS3 is on schedule to be released in 2016 – ten years after the release of the PS3.

Now that these facts have been gathered, we can try to form some theories and hypotheses. If the PS3 had a 10-year life expectancy, it seems reasonable that the Xbox 360 would also have a life expectancy of 10 years. In this scenario, the third Xbox would be released worldwide in late 2015 – 10 years after the release of the Xbox 360. This seems like a logical theory based on the facts available and the success that Microsoft has enjoyed by beating Sony to market by one year.

From this point of view, it isn't a surprise or a concern that Microsoft is waiting on assembling engineers for development of the next Xbox. Even PCs at their highest and most expensive points right now do not offer a significant improvement over what is seen in the graphics offered by Xbox 360 and PS3. This is important because history has always shown that whenever a new generation of consoles has been released, there is a brief period where the consoles have the hardware advantage over PCs.

For example, when Xbox 360 launched in late 2005, it did so with a revolutionary ATI GPU based on Unified Shader technology, which PC graphics cards didn't see until 2007. The same thing can be said about the eDRAM technology used in the Xbox 360. And in 2005 when Xbox 360 launched with a tri-core CPU, PCs were only using dual-core CPU processors.

We haven't seen technology evolve enough for a new generation of consoles to replace Xbox 360, PS3, and Wii 2. Remember, based on the specifications known so far, the Wii 2 is evolutionary – intended to compete directly with the Xbox 360 and PS3 in a high-definition online environment. This is an online environment where the Wii 2 is at a big disadvantage compared to Xbox Live.

The third Xbox will be revolutionary due to the fact that it will be made up of customized technology that PCs eventually become based on in order to make multiplatform programming easier for developers. Over the course of time, PCs will eventually catch up and overtake the consoles again. This is a cycle that has continuously repeated itself throughout videogame history. PC technology is the one form of technology that we can look at and use as a constant measuring stick to estimate when we might see new consoles overtake high-end computers.

I believe consoles will not be able to make a significant improvement over PCs until at least 2014 or 2015. This is when rumors indicate new forms of technology will be available for use at a price the public would see as reasonable. But just because technology is available doesn’t necessarily mean companies will want to rush something to market.

From a business perspective, the Xbox 360 and PS3 are only now starting to reach their peak. Xbox 360 is now the top-selling console every month in North America and other English-speaking parts of the world. And only recently has the PS3 started consistently earning net profits each financial quarter.

With that in mind, Microsoft and Sony probably aren’t in any rush to kill off the Xbox 360 and PS3, even if the technology was available. Microsoft recently released the Kinect, which immediately became the fastest-selling electronic item in history. By selling ten million units within a 60-day time period, Kinect is now in the Guiness Book of World Records. It would be foolish to put an end to the life of an Xbox 360 performing that well!

Sony’s initial investments in the launch of the PS3 caused a net loss of nearly $4 billion. After the disappointing launch of the PS3, Sony continuously saw net losses of hundreds-of-millions of dollars each financial quarter afterwards. From a financial point of view, it seems reasonable to presume that Sony wants the PS3 to last until 2016, if possible. This would be the only way for the PS3 to have any chance of earning an overall net profit during the course of its life on the market.

At this point in time I really doubt we will see a new Xbox console by 2014. But, we do know that Microsoft wants to expand the Halo series and Gears of War series. One hypothesis of mine is that a new series known as Pendulum Wars (a prequel to Gears of War) would be released with the third Xbox. If Epic spent three years developing this game, it would be ready by the end of 2014.

The question is if the technology available by 2014 would offer revolutionary advancements that a competitor like Sony would not be able to eclipse two years later. To be honest, I think Microsoft probably could have a big game from Epic, such as The Pendulum Wars, released by late 2014. But, it might be better for Microsoft to take their time getting everything right and putting all the icing on the cake. This would probably make 2015 a better release date, especially since Microsoft would continue earning money from the Xbox 360 the whole time.