At E3 this past year, Xbox chief Phil Spencer made a surprising admission that work on next-gen consoles had already begun, and even let slip the plural "devices" when talking about what the next generation of Xbox codenamed Scarlett might look like. According to a report from tech site Thurrott, that blurry picture is starting to come into focus with Microsoft planning to make a traditional console as well as a more capable streaming box as a cheaper option.

First, Thurrott reports, Microsoft is indeed going to release a traditional console as they have always done. This means a singular box with up-to-date hardware inside to play games locally. It is unknown exactly what hardware it will contain as the development on the hardware seems to be early, but one would expect a generational leap over the Xbox One.

Where it gets interesting is that a second device is rumored to also be in the works. This box will be fairly hardware-light, mostly for accepting controller inputs, displaying an image to the screen, and collision detection according to Thurrott. That means it's not just a streaming box as we know it, but one that offloads some computational ability to the local hardware. It is pointed out in the report that this makes the Xbox-lite a bit more expensive than you would think but still a lot cheaper than a traditional console.

The idea for Microsoft is to leverage their vast bank of Azure servers, comparable to the kind of cloud Amazon wields with Amazon Web Storage, for use with their consoles. Microsoft tried to apply Azure to the Xbox One, but trepidatious development due to consumer confusion, a lack of a cohesive vision for its use, and poor internet infrastructure put it on the backburner. It wasn't until E3 this past year when Spencer began talking up cloud services once again, shortly before segueing into discussion of Scarlett.

The streaming box idea helps Microsoft escape the loss-leader model of traditional hardware by offering a solution that still heavily emphasizes a subscriber-based game distribution model. The company has already signaled their intentions in this arena by pursuing Game Pass, which provides a Netflix-like platform for games. A cloud-based Game Pass would probably close the circle and even, as we have heard from a few sources, allow Microsoft to shop the service to other devices.

Thurrott reports that Microsoft has cracked the latency issue with cloud-based gaming and likens the lag more to a multiplayer match than existing streaming solutions. They go on to say that the Xbox-Lite is further along in development than the traditional console and both are aiming for release in 2020.

[Source: Thurrott]

The biggest problem with this technology is something Microsoft has no control over: infrastructure varies wildly, as do the whims of internet service providers. A cheaper Xbox doesn't save you money in the long run if you're hitting data caps with your single-player Assassin's Creed game. Who knows what internet access will look like in North America in two years' time, but the last two years have not exactly filled me with confidence that its on an upward trend toward consumers.