Inside Microsoft’s ambitious plan to build the future of Xbox, from a Netflix-style gaming service with blockbuster games to brand-new consoles

When it comes to game consoles, Microsoft’s Xbox One has been handily defeated by Sony’s PlayStation 4 – the latter boasts nearly 100 million sold, while Microsoft outright stopped reporting Xbox console sales numbers.

Estimates put the Xbox One somewhere in the range of 30 to 60 million sold. It’s no slouch, but Microsoft’s game console isn’t likely to catch up.

And that’s why it’s good news for Microsoft that a new Xbox is just over the horizon.

Xbox leader Phil Spencer, above, detailed the next-generation Xbox console – currently codenamed “Project Scarlett” – in Los Angeles last week.

Business Insider was there, and we spoke with Spencer directly afterward about the future of Xbox.


The big push with Xbox, Spencer said, is choice: Microsoft wants to sell you games on a console, through a streaming service, or on a PC.

caption
Upcoming Microsoft-published Xbox game “Gears 5” will appear on game consoles and PC at the same time. Microsoft will even publish the game on competing game stores, like Steam.
source
Microsoft

During the Xbox press briefing last week, Microsoft was trying to convey one central point: choice.

Do you want to play games on an Xbox? A PC? Your phone? Microsoft wants to reach you there – ideally across all three.

To that end, Xbox leader Phil Spencer detailed major new initiatives across all three platforms: a new game console (Project Scarlett), a new cloud gaming service (Project xCloud), and a new PC gaming service (Game Pass).

“That remains core to what we’re trying to do,” Spencer said. “To allow creators to reach the customers that they want, allow players to play the games that they want with the people they want to play with, anywhere they want. And it fits right into the opportunity ahead.”

It’s part of a broader effort at Xbox, led by Spencer, to bring Xbox games to as many people as possible – even if those people don’t buy an Xbox console.


The next Xbox console — Project Scarlett — will offer cross-generational support for at least some games.

caption
“Fortnite” is a big enough deal that it will continue functioning across console generations — a first for home game consoles.
source
“Fortnite”/Epic Games

The next Xbox console will play Xbox One games. It will also play all the original Xbox and Xbox 360 games that already work on the current Xbox One. It will also work with all the current Xbox One accessories, from gamepads to fight sticks.

“The original Xbox games and Xbox 360 games that are backward compatible now on your Xbox One, those will play. Your Xbox One games will play, your accessories will play,” Spencer clarified to me.

But the compatibility actually stretches further – games with large existing communities will continue to grow those communities on the next Xbox.

“I don’t want to announce anything about what another game team is doing,” Spencer said, “But I think what we would say at the highest level is if you talk about these games that have such massive communities today, a lot of those developers and studios are going to want to think about how they grow their community – not how they take it to zero and try to rebuild it.”

It doesn’t take a lot of hard thinking to imagine the games Spencer is talking about; games like “Fortnite” and “Minecraft” stand out, among many others with large, multiplatform audiences.

More than just being able to play these games cross-platform – between Xbox and PlayStation, among others – the next Xbox will have to bridge console generations.

“Even as we go and reach new customers as new hardware comes out, [developers] are always thinking about how does this expand,” Spencer said. “I think that plays into cross-play.”


The “Netflix of gaming” streaming service, Project xCloud, is likely to have its own library — just like Netflix.

For a monthly fee, Netflix offers subscribers an instant library of content. Some of that content is produced by Netflix, and some isn’t. You don’t need to download any of the content – it just streams directly to your device.

To date, no one has created something directly comparable in gaming. There are a few services that offer streamed video games, but those services charge an extra fee for each game. Microsoft offers an instant library-type service called Game Pass, but each of the games on that service must be downloaded to your console before playing.

Project xCloud may be the first to actually deliver a subscription-based video game streaming service with an instant library, à la Netflix.

“I want it to be about choice, but I do think the strength that we’ve already seen in the last two years with Game Pass is an important component of this,” Spencer said when asked about the business model for xCloud.

“There’s paying for access, and then there’s paying for a library of games,” he said. “And the Game Pass component is really critical, because you want to have access to hundreds of games that you can go play. That is more your Netflix-type example.”

What seems most likely is that Microsoft offers some combination of its Game Pass subscription tied to its upcoming game streaming service.

Spencer wouldn’t go into details just yet, but he did offer a tease: “When you look at other options out there, that library of content that’s available is such a critical thing. We have decades of working with partners to bring that together as an industry.


For now, there’s only one new Xbox console coming, contrary to rumors of multiple boxes in the works, as well as Spencer’s own statements last year.

Last year, at the 2018 version of the big Xbox press conference that happened last week, Spencer made the initial announcement that Microsoft has “game consoles” in production.

Notably, he said “consoles” – it wasn’t a slip of the tongue.

This year, though, he spoke of Project Scarlett as if it were a single box scheduled to arrive in holiday 2020.

So, what gives? Is Microsoft making multiple new Xbox consoles or what?

“Last year we said consoles, and we’ve shipped a console and we’ve now detailed another console. I think that’s plural,” Spencer said.

The console that Microsoft shipped earlier this year, of course, was not a new Xbox console – it was a disc-less version of its already existing Xbox One S hardware.

“Technically that is plural,” Spencer said with a laugh after I pushed him on the technicality he invoked. “Right now,” he said, “we’re focused on Project Scarlett and what we put on stage.”

That said, given Microsoft’s recent history with multiple versions of Xbox One, we wouldn’t be surprised to see new versions of Project Scarlett in the coming years – it just sounds like we’ll only see one in late 2020.


Check out the full reveal of Project Scarlett in this new video from Microsoft: