Natal represents the "Holy Grail" of console development

Microsoft's Project Natal has the potential to inspire four year's worth of innovation on the Xbox 360 system, according to outgoing president Robbie Bach.

He said that the motion sensing device breathes new life into the hardware mid-way through its lifecycle – something that he considers the "Holy Grail" as it can reinvigorate the 39 million hardware units already in homes around the world without asking consumers to pay out for a new console.

"There's a tremendous opportunity from a business perspective to produce a new experience for people without shipping a new console," Bach told Techflash.

"I mean, that's sort of the Holy Grail in many ways of the console world is how do you ship completely new game experiences without actually forcing everybody to start over again, and I think Natal certainly presents that opportunity."

"You know, now when I think about the broader impact, I think you're going to feel that over 12, 24, 36 months, because I think we'll do some great experiences out of the gate, and people will say, wow, that's really cool, and then the creative teams will really hit their stride, then the technology team will really hit its stride, and how it integrates with Live will get enhanced. Because it's software and services oriented, you've got three, four years of some really cool innovation that can happen."

"It's a midlife kicker for the 360, and it's an opportunity to really drive that business in a dramatic way," he added.

Bach announced yesterday that he's to retire from Microsoft after leading the Xbox 360 division, handing over control to Don Mattrick, who he praised for being able to balance business with the creative understanding needed to manage an entertainment product.

"He's a great combination of a guy who's a CEO-type guy who knows how to run a business, but yet who understands great creative sensibilities and understands how to work with creative talent. You don't see that kind of capability very often," said Bach.

Discussing the high cost of entry for Microsoft to enter the home console business, Bach acknowledged the company had lost a lot of money taking on Nintendo and Sony, but the long-term investment has paid off in the past three years.

"I lost exactly how much money I wanted to," he said.

"Here's the way I think about it. The company did make deep investments, there's no question about that. On the other hand, you're now seeing the fruits of that reward, so three years of continuing profitability with actually I think a lot of upside going forward, especially given what we're doing with Natal. Plus the asset value of what's been created, forget the ongoing earnings potential that's been created, but the asset value of what's been created more than makes up for the investment we made."