Microsoft has a plan for keeping the cost of a next-gen Xbox down

Plenty of set-top boxes have the ability to deliver streaming games to your TV these days, but can Microsoft make that technology stick with the mainstream?

That’s reportedly the plan for the company’s next generation of Xbox consoles. In addition to a more traditional, high-powered gaming machine, Microsoft is expected to launch a lightweight offering that offloads much of a modern game’s complex processing tasks to the cloud.

The report comes from Paul Thurrott, a tech reporter with a long history of digging up Microsoft scoops. The company’s two-console plan is meant to keep the cost of entry down for a mainstream audience while still providing a premium option for those that prefer to invest a little more in their gaming.

The two projects, codenamed Scarlett and, for the lightweight option, Scarlett Cloud, are being developed side-by-side for a planned simultaneous release. The latter effort is said to be further along, though that shouldn’t be a surprise. 

At any given moment during a hardware generation, you can safely assume that platform holders like Microsoft and Sony are already working on whatever hardware comes next. Specs aren’t finalized until the late stages of these projects, as release plans are locked in, since computing and graphics processing tech evolves so quickly.

But make no mistake: A cloud-based console built to run high-end mainstream games (think Halo or Gears of War) is the news here. It’s not something we’ve seen before in the console space, largely because cloud-based game streaming hasn’t ever been reliable enough for one of the major console-makers to bet on it as the core of a gaming ecosystem.

Don’t be shocked if $200 turns out to be the price point for Scarlett Cloud.

The big advantage of going the cloud route is cost. When you offload the heaviest processing lift to a data center, the box that sits in your home doesn’t need as much fancy tech. Right now you can pick up an Nvidia Shield, one of the more powerful media streaming boxes on the market, for less than $200. Don’t be shocked if that turns out to be the price point for Scarlett Cloud, too.

Of course, that kind of product is only an attractive option if the streaming actually works well. This is where Thurrott’s reporting offers some insight.

Microsoft apparently intends for the Scarlett Cloud to pack in a little more power than you might be used to seeing in a typical streaming box. The hardware in your home will handle tasks like “controller input, image processing, and importantly, collision detection” while a data center (and your hopefully robust online connection) fills in the rest.

Thurrott notes that such an approach means a pricier streaming box. But turning back to our Nvidia example: The Shield currently sits at the high end of the market. A new Xbox priced to compete with that would still cost hundreds less than your average new console (the Xbox One launched at $399 in 2013, or $499 with a Kinect in the box).

This approach of splitting up the processing needs between your home box and a data center still doesn’t guarantee a flawless streaming experience. But that kind of tech has gotten a lot more reliable since the Xbox One launched in 2013. The possible end of net neutrality represents a bigger obstacle for dedicated game-streaming services, but that’s a whole other conversation.

While all of these Scarlett details are nothing more than a rumor for now, the details do line up with other moves and statements that Microsoft has made in recent years.

The ever-increasing value of Xbox Game Pass should be the first thing you look to. Microsoft’s subscription service doesn’t include a streaming component (yet), but it does offer unfettered access to a large library of games — including day one access to every new Xbox-exclusive release — for $10 per month.

Xbox Game Pass got the spotlight treatment at the annual E3 trade show in June. A number of big third-party releases were added to the catalog, from the likes of Ubisoft and Bethesda Softworks. The service also introduced a FastStart feature; Xbox Game Pass titles still need to be downloaded in full, but those with FastStart support can be fired up twice as quickly. 

It’s not quite game streaming. The most important bits of FastStart-supported titles are simply downloaded first so the game can be launched more quickly. But we’re getting warmer.

Also at E3, Microsoft devoted a whole segment of its annual press conference to vague talk about the future. Xbox boss Phil Spencer said it outright: “Our cloud engineers are building a game streaming network to unlock console-quality gaming on any device. … We are dedicated to perfecting your experience everywhere you want to play — your Xbox, your PC and your phone.” 

It’s a move Microsoft tried to make in a much more limited way at the start of the current hardware generation. The Xbox One originally launched as an “always online” proposition, which in hindsight seems like it was meant to pave the way for an eventual integrated streaming service.

“[We’re] building a game streaming network to unlock console-quality gaming on any device.”

The feature was eventually canned between the console’s spring 2013 announcement and its fall 2013 launch, in response to intense blowback. Xbox fans at the time weren’t ready to accept a $400 console whose ability to function depended on a stable internet connection.

That’s probably why there’s still a “premium” Scarlett option in development, a more traditional, hardware-heavy game console that will surely be priced to match the current generation’s heavy-hitters in their prime. For those that prefer to have stacks of discs and the security of offline play, that option will (apparently) remain.

But Microsoft seems to understand that living room gaming is increasingly under threat from cheaper alternatives, such as mobile devices. Even high-end PC gaming isn’t as costly as it once was, and those who do invest in computer hardware can add reliable in-home game streaming to their TV for less than $50.

Microsoft has also learned that betting on console-exclusive franchises alone can be a losing proposition.

Sure, that’s been the winning formula for PlayStation during the current generation, with newcomers like Horizon: Zero Dawn and the promising Ghosts of Tsushima sliding in alongside established favorites like Uncharted. But that kind of success comes and goes, as flagging interest in aging series like Halo and Gears of War has demonstrated.

Point being: The traditional biz model for console gaming feels like an increasingly archaic approach. Unless your hardware does something new and different, like Nintendo’s hybrid Switch console, you’re constantly at risk of falling behind the times. 

Just don’t expect concrete answers on this stuff anytime soon. Microsoft is reportedly eyeing a 2020 launch for Scarlett; even if Thurrott’s reporting is accurate, there’s still plenty of time for plans to change and evolve before release.

That said, it’s increasingly clear that there’s much more money to be made from an engaged audience of subscribers than there is from selling piles of hardware at retail. That’s the real revelation in Thurrott’s report. 

The future of Xbox isn’t in Scarlett specifically; it’s in how Microsoft’s in-development hardware will serve as a delivery system for Xbox Game Pass and whatever might replace it.