Microsoft is currently developing the successor to the Xbox One X gaming console, which will reportedly launch sometime in 2020. While the next-gen Xbox is expected to have updated hardware, Microsoft is also working on bringing game streaming to the console and is reportedly also working on a second Xbox which will be limited to streaming games.
A streaming only Xbox will allow for limited local hardware, which will only be required to handle tasks like controller input, image processing, and collision detection. These tasks are essential to reducing latency in game streaming, and Microsoft is said to be planning to split processing between the game running locally and in the cloud in order to reduce input lag and other image processing delays.
The next-gen Xbox is currently being developed under the codename Scarlett, and the company also revealed that they are working on game streaming service for Xbox (codenamed XCloud) which they hope will become the 'Netflix of video games' with Xbox Game Pass.
Game streaming is already available through certain providers, including GeForce Now, PlayStation Now, Shadow, and Liquid Sky. Sony for example uses its PlayStation Now service, to allow consumers to stream PS2, PS3, and PS4 titles to PCs or PlayStation 4 consoles.
Once available, Microsoft hopes to allow a variety of devices, including phones to be able to access this service. By investing in cloud streaming, Microsoft hopes to grow its gaming business through recurring subscription models rather than just margins from console hardware and software sales.
Microsoft has fallen behind Sony in the current generation of console sales, and is looking at game streaming as an opportunity to regain the lead. While competition is strong, none of the current services have fully addressed latency issues in fast paced games like first-person shooters, so Microsoft’s hardware approach could prove key to addressing some of those problems on the console side.
source - Microsoft | TheVerge