Unlike any generation prior, this generation seems to have two very distinct phases, the second of which is starting now.
According to Wikipedia, we are in the seventh generation of the console cycle. As we all know, this generation is home of Nintendo's Wii, Sony's PlayStation 3, and Microsoft's Xbox 360. Additionally, though not a part of the seventh home console generation, this is still currently the era of the PlayStation Portable and the Nintendo DS.
Surprisingly, when looking at each and every console both home and portable, we are seeing an across-the-board reboot. Sony has just launched the PSPgo, a fully digital device that offers no physical media option whatsoever. On the home front, Sony is preparing their wand controllers, a step towards what Nintendo has done with the Wii. Microsoft is readying Natal, another motion controller meant to reboot the generation so that they may start anew. Nintendo on the other hand has just released the MotionPlus as well as the DSi. The MotionPlus will offers that extra amount of precision the Wii was lacking, providing for more accurate 1:1 motion control. The DSi is also making a foray into digital distribution with DSiWare, small on-the-go games that aren't large enough for a full release.
Never before have we seen consoles be completely refocused mid-generation as we are seeing here. Rather than save these concepts for a new console with more horsepower, each company has clearly decided that what's available is good enough for now in terms of hardware capability. In the case of Microsoft and Sony, this type of reboot makes complete sense. With Nintendo's Wii still selling extremely well, it's obvious they were on to something with motion control. Being that their systems are more than capable graphically, it's an obvious move to retool their control mechanisms and start fresh without waiting for the next upgrade in hardware.
For Nintendo on the other hand, the move to MotionPlus without a new system entirely is slightly puzzling. While MotionPlus is a great peripheral that does amazing things for motion control on Wii, its attach rate is undoubtedly not going to be as strong as it would be if Nintendo relaunched with a new system. It's questionable whether or not most developers will feel comfortable supporting the device without an alternate control scheme knowing the attach rate is not analagous to the ownership rate. Of course, this naturally lessens the impact of the MotionPlus for Nintendo. Whether or not they need this peripheral to perform well can only be told with time.
If Sony and Microsoft are able to produce compelling play experiences for all markets, Nintendo may find that at least current sell-through rates of hardware and software are more in line with their competitors.
This puts the market in an interesting position going forward. Typically, a console generation lasts about 5 years with new consoles being announced around the third year. With this generation, and particularly this reboot, not a single one of the three competitors seems interested in rolling out new hardware. It's understandable considering the fact that HD development costs are still high, and graphics are still mostly on the bleeding edge of technology. Regardless, it will be interesting to see if the ten year life cycle that Sony spoke about before the generation began will actually occur.
If Nintendo is able to continue selling through Wiis and producing casual friendly software, it seems likely that even with their underpowered box, they will continue to perform well and lead the generation. The question is, will they continue to be a generation behind in graphical prowess, or will they seek to match their competitors come start of the next generation?
It also begs the question who will be the first to spark plans for the next generation? Nintendo seems like an obvious choice, but they have proven unpredictable, so their next move is questionable. Given Microsoft's problematic hardware and propensity for launching first, they are also a likely candidate. If anyone, Sony seems the least likely given the fact that their hardware is just catching on.
Right now we seem to be on the cusp of motion control standardization, as that is the primary focus of the reboot. Will next generation continue down this road? Well, I suppose we'll have to see what Round 2 of this war holds before we can come to any definitive conclusions, but it will most definitely be interesting to see what the various industry players have planned going forward. It's my prediction that we won't hear a peep about a new generation until E3 2011.
It will be interesting to see if and how this console shifts when all of the upcoming motion controllers have hit the market. Nintendo has clearly won the first battle, but the war may be won by one of the other competitors.