Although not much has been said about it publicly, Microsoft is still considering a cheap new micro-console that could stream games from its xCloud service, according to a new set of rumors from people who are familiar with Microsoft's plans.

The console would be an alternative to the much-pricier Project Scarlett that’s due out in 2020, and could potentially have limited smart TV functionality as well.

The source of these new rumors is Thurrott.com’s Brad Sams, via a new YouTube video (below), who’s spoken to sources inside Microsoft and are familiar with the plans for the micro-console.

According to Sams, Microsoft is driven to create a micro-console because it wants a cheaper entry-point for its xCloud streaming service. It seems that, while a traditional Xbox console is obviously the preferred route, Microsoft recognizes that not every gamer can invest $249 (about £250, AU$350) in new hardware every few years.

That said, an Xbox micro-console wouldn’t offer the same functionality as a full-size Xbox and wouldn’t likely be able to play Xbox One discs, however it does seem likely with the advent of Google Stadia – a game-streaming service from Google that can use a Chrome browser or Chromecast Ultra to stream games in 1080p – that Microsoft is looking at new avenues for its service.

The case for a Project Lockhart-like system

Now, admittedly, the plans for a smaller, less powerful Xbox console aren't new. In fact, up until a few months ago, you might've heard them in the context of 'Project Lockhart' - an all-digital Xbox console that was similar in design to the All-Digital Xbox One S that was released back in May.

But, when Microsoft only announced the more powerful Project Scarlett on stage at E3, most outlets agreed that Project Lockhart is either DOA or shelved.

If Sams's sources are right, this new xCloud console would scale things back even further than the already less-powerful Project Lockhart – potentially limiting the console to xCloud, a few streaming video apps and nothing else.

If Microsoft's goal is to create a basic system that can connect to your TV via HDMI and be controlled with an Xbox One controller, it seems that an even smaller system like the one described above could be the ticket into gamers' homes.