As we brace ourselves for E3 2016 (14-16 June, gaming fans), the speculation is ramping up about what we can expect to see. With the Xbox One trailing Sony's PS4 in the console race, the pressure's on Microsoft to come up with something of note.

The logical next step is virtual reality, what with the PlayStation VR arriving later this year, and a major development studio has confirmed to Ars Technica that it does indeed have an Xbox One VR title in the works for a planned 2017 launch.

Microsoft's current flagship console doesn't have VR capabilities or indeed a VR-compatible headset to go with it, so it sounds very much like some upgraded hardware is on the way - hardware this dev studio is targeting.

Getting in the VR game

Unfortunately, we don't know the name of the studio or the name of the game, but Ars Technica says the title will be demoed on PC or PS4 at this year's E3. Apparently, we're talking about "an established, long-running franchise" developed by a European studio here, so make of that what you will.

The obvious conclusion is that there's a VR version of the Xbox One coming next year: churning out high-resolution, virtual reality graphics requires a heck of a lot of processing power, which is why many industry insiders think a more powerful PS4 is also on the way.

Is Microsoft going to take the wraps off an Oculus Rift-ready, enhanced Xbox One at E3 2016? It's impossible to say for sure, but this is another hint in that direction. As usual, we'll bring you all of the E3 news from LA as it happens.

Earlier rumours suggested Microsoft may reveal two smaller devices at E3 2016

VR headsets - which one is right for you?