The president of Microsoft's Entertainment and Devices division, Robbie Bach, has refused to confirm that the company is developing a new console, but did say that the challenges for a new platform are harder than previously - and that the Xbox 360 is likely to be around for longer than the original Xbox.
"Just coming up with something that's faster and prettier isn't going to be sufficient," Bach told The Mercury News. "The life cycle for this generation of consoles - and I'm not just talking about Xbox, I'd include Wii and PlayStation 3 as well - is probably going to be a little longer than previous generations."
The original Xbox was released in 2001, with the Xbox 360 going on sale in 2005 - but with no official word on new hardware plans as yet, it looks unlikely that anything new will see the light of day until at least 2011, while Sony has often talked of a ten-year life cycle for the PlayStation 3.
But if the current economic climate continues for a long period of time those dates might be pushed back even further, with consumers unlikely to want to spend significant amounts of money on new hardware and software.
"When you look at consumers, they are going to be more value-conscious," Bach added. "We want to make sure that as the economy does start to recover, that we're positioned well."