The 32X was one of the things that killed Sega. Making add-ons or expansions for existing consoles has proven to be a failed business model.

The problem? It fragments the player base. Game developers want the largest number of people to be able to buy their games. If your console has 3 different add-ons and only a fraction of the players have each one then game developers are going to ignore that add-ons to focus on developing for the base console which they know everyone will have.

So you end up spending a lot of time and money developing add-ons that developers are all but guaranteed to ignore and so players will ignore the add-ons because they don’t have enough games available for them. You’re far, far better off taking the time and money you would have put into an add-on and instead put it into the next generation console.

Yes, for the same reason (fragmented player base) it’s also hard to convince developers to move to your new next gen console. However, you have a few advantages with a new console that the add-on doesn’t have. For one, you can sell the new console to customers who never bought your previous console. For another, you’re not restricted by the hardware requirements or limitations of the old console in any way. This makes the new console easier to develop and easier to distinguish (graphics wise), making it a much more attractive buy for customers. The ease of development of the new, clean-slate console means it can often be a lot cheaper but also with better graphics and sound, more capabilities etc. because it doesn’t rely on the old technology (electronics wise) of the previous console.

Lastly, and this is a big one, you can convince game developers that the next gen console is the future and you are going all-in on it by stopping sales of the old console. You can’t do that with an add-on for obvious reasons!