In the last console transition, Microsoft kicked the unprofitable Xbox to the curb in favor of the 360. According to an MS executive, things will be much different this time around.

Microsoft chief marketing and strategy officer Yusuf Mehdi stresses that the company plans to keep supporting the Xbox 360 long into the Xbox One lifecycle. Mehdi said, "We are going to continue to invest in Xbox 360 and the two devices can work in concert. So it isn't like the day we ship the Xbox One your [Xbox 360] won't work. We will continue to support it. In fact, we're going to ship over one hundred new games on Xbox 360. So you'll be able to still play your games, just not on the same exact box."

He cited reduced production costs and a large installed based as reasons why the system could remain very profitable in the future.

[Source: Gamespot]

Our Take:
Once again, Microsoft is learning from past mistakes. Sony has always stressed that its home consoles have a 10-year lifecycle, and has continued to release new version of past PlayStations while remaining focused on next-gen. It's just good business. For one, there are emerging markets around the world that are ripe for older, lower-priced hardware. In addition, new software can sell to a huge, mature installed base. And, as manufacturing costs continue to drop, each sale of an old system becomes more and more profitable. It's also a win for gamers who might not have the money to invest in the latest and greatest hardware.