Xbox One X with Controller

Microsoft is in a difficult spot with this generation of gaming hardware. A lot of work has been done to improve the Xbox One, resulting in the Xbox One S and Xbox One X. However, Sony enjoys a very healthy lead and Microsoft won't catch them. For the next generation of hardware, Microsoft is going to act more like Nintendo and try something a bit different.

Last month we found out the next Xbox is codenamed Scarlett and will be a family of devices, but we didn't know what that meant in terms of hardware choices. Now, as Thurrott reports, it looks as though we're getting two machines: a traditional console and a streaming box.

The traditional console is what you'd expect. A new Xbox capable of playing physical and digital games with access to Xbox Live and Xbox Game Pass. The internals will be a healthy upgrade over what's inside the Xbox One X. The streaming box on the other hand will play all of the same games, but they will be streamed from the cloud using Microsoft's datacenters around the world and Azure.

The streaming Xbox will be significantly cheaper than what we are used to paying for a console, but more than existing streaming boxes out there. That's because Microsoft is thought to have solved the latency issue streamed games suffer from by including just enough hardware in the box to run a portion of the game locally, which is referred to as a "slice." By taking this approach, the game is running locally so latency problems are removed, but the same game is running in the cloud keeping everything in sync.

It's a new way of tackling the problem, but also a bit of a risk for Microsoft. Will gamers buy a streaming box? Will they accept that such a box requires a subscription payment to keep functioning? And could a streaming box prove so popular the traditional console doesn't sell? These are all questions Microsoft will be asking and trying to answer in the run up to an expected 2020 launch.

For now, none of this is confirmed and Microsoft could opt to cancel the streaming Xbox right up until just before launch. That's part of the reason why a traditional console alongside it is so important. If things don't work out, Microsoft can launch one new machine just like it did with the last three generations of hardware.