Google pushing out a new letter each year is working wonders even if the hardware does not degrade at all. People remember how a major update years ago did make things noticeably better and won't easily give up hope that the current increments would be similar (same thing for hardware btw, people remember the huge progress between the very first generations of smartphones and want to repeat that experience, no matter how futile the attempt might be).
Internet lore suggests that the majority of users does not care at all for Android versions, but I don't think that this is true: median users do care, just not as much as the vocal group that mistakes the lower level for not caring at all.
I wonder if google even wants to continue the yearly update circus or if they feel pressure from manufacturers to keep that wheel rolling.