Over the last couple of years, there have been conflicting reports about Microsoft's (MSFT) work on a cheaper Xbox to complement a flagship, next-gen, game console. Reports in 2018 suggesting that system a console is being prepped were followed by mid-2019 reports suggesting that Microsoft is focusing on the flagship Xbox at least for now.
However, a new report from gaming site Kotaku (it cites four people briefed on Microsoft's plans) suggests the cheaper Xbox is still being developed, and also includes a few interesting details about what it will look like.
Kotaku's sources state that unlike the flagship Xbox, which is codenamed Anaconda and was discussed by Microsoft execs in June, the cheaper console, which is codenamed Lockhart, won't feature any kind of disc drive. Rather, it will only support digital game downloads and perhaps (assuming Microsoft's nascent xCloud service is eventually brought to Xboxes) cloud gaming.
In addition, Lockhart will have a less powerful GPU than Anaconda: Microsoft is said to be aiming for an "ideal target performance" of 60 frames per second (fps) at a 1440p resolution for Lockhart, compared with 60fps at a 4K resolution for Anaconda. The company has previously said that Anaconda will support 8K gaming, real-time ray tracing and up to 120 fps.
Nonetheless, Lockhart will still reportedly feature "a faster CPU than any current video game console." It will also (like Anaconda and Sony's (SNE) upcoming PlayStation 5) rely on solid-state drives (SSDs) rather than hard drives.
No specifics were given regarding Lockhart's launch date or pricing. Microsoft has previously said that Anaconda would be available by the 2020 holiday season, and Sony's PS5 is expected to be available by then as well.
One clear benefit to launching a cheap Xbox: It gives Microsoft an opportunity to grow the Xbox's installed base, particularly among the types of casual gamers who have historically accounted for much of Nintendo's (NTDOY) console base.
Microsoft, like its console rivals, has long embraced a Gillette-like strategy of selling consoles for a loss and making it up via game sales and services. And by expanding its Xbox base, Microsoft would grow the number of consumers it could monetize via game royalties, Xbox Live Gold and Xbox Game Pass subscriptions and/or xCloud usage.
Moreover, should xCloud, which will initially work on Android devices and PCs, eventually support Xbox gaming, Lockhart would probably be just as capable of streaming 4K-resolution games via xCloud as Anaconda, in spite of having less local processing power.
To some degree, the launch of a cheaper Xbox would also be a positive for AMD (AMD) , which has been confirmed to be the processor supplier for Anaconda and also the PS5. Microsoft, which plans to put an AMD processor featuring an 8-core CPU and a powerful GPU inside of Anaconda, would almost certainly also rely on an AMD chip to power Lockhart, in order to maintain code compatibility for developers.
An AMD processor going into a product such as Lockhart would most likely carry a lower price than the processors that will power Anaconda and the PS5. But if Lockhart helps meaningfully increase AMD's console processor volumes and takes some share from the popular, Nvidia-powered (NVDA) , Nintendo Switch, this is a tradeoff that AMD might be quite comfortable with.
We should have confirmation at some point next year about whether Lockhart will be launching, and (assuming it launches) how it will be priced. But at a time when Microsoft's options for monetizing Xbox users go well beyond game royalties and continue to expand, the case for launching a low-cost, discless Xbox appears pretty strong.