A few weeks before E3, rumours sprung up that Microsoft was working on an updated Xbox One console that might support VR videogames. It turns out those rumours are true.

Microsoft revealed its upgraded console at its E3 press conference in Los Angeles, California today. Named Project Scorpio, the console is designed to offer “premiere VR experiences” with 6 Terraflops of GPU, though a compatible VR HMD hasn’t been announced. It will also run 4K games and support every pre-existing Xbox One title. The only confirmed game so far is Fallout 4, which suggests HTC Vive support might be in. It’s launching in Holiday 2017.

That puts Microsoft directly in competition with Sony and its PlayStation VR system, two years after the kit was announced. It also means the Rift just hugely expanded its potential market with a machine that should be far less complicated for casual fans to get to grips with. The machine’s announcement was also paired with the reveal of a new, smaller console – Xbox One S.

This isn’t the first time that Microsoft has worked VR. At last year’s show it was announced that Windows 10 PC owners could stream Xbox One games into a virtual theatre to be played on the Oculus Rift from Oculus VR. Of course, the company’s popular Xbox One gamepad is also being bundled in with every unit of the HMD sold, so the two actually seem pretty close.

That’s one upgraded console down, one to go. We know that Sony is working on a similarly updated version of its PlayStation 4 console – even the company itself has admitted it – but it won’t be at E3 this week. Given the PS4 is powering PlayStation VR, we’re expecting the new system to offer better performance for VR supported titles, addressing concerns many have had about just how suited the original system is for VR.

We’re also still keeping an eye out for Nintendo, which is rumoured to be adding VR support into its upcoming hardware, the NX. Sadly, the new tech will also be skipping E3 this year.

As far as E3 surprises go, this is probably going to be as big as it gets for VR. How will Sony respond?