This is not a “console war” article. As someone who now primarily uses Steam for my gaming needs, along with the fact that both companies are much more PC-friendly these days, much of my interest in Sony or Microsoft’s console shenanigans has greatly diminished. That being said, both of these companies are still massive influences on the mainstream gaming market, and their actions will undoubtedly have wide ripple effects on the industry as a whole. While Xbox’s influence has arguably diminished in recent years, they are still a core pillar of the industry at this moment in time, and I think it’s extremely interesting to guess where they might go next based on their apparent current trajectory.
Despite their massive recent acquisitions, Microsoft’s Xbox division hasn’t exactly been in a strong place lately. The incredibly popular Xbox 360 found its way into millions of households, but the following generation dropped the ball. Since the fumbled launch of the Xbox One, Microsoft seems to have been struggling to find solid footing for its once ubiquitous gaming brand; PS4 and PS5 have heartily outsold the Xbox One and Series consoles, respectively. After owning the original Xbox and Xbox 360, I personally skipped the next two generations entirely in favor of Sony’s offerings. And Microsoft seems to be well aware of this precarious position; their new campaign putting Game Pass front and center, porting their games to competing platforms, and labeling everything with a screen as “an Xbox” could indicate some pretty drastic changes to their core business model. I am not a console architect, a marketing specialist, or Fortune 500 CEO by any means; but putting some of the pieces together and looking at the current market, I’d like to take a crack at predicting what Xbox’s next move could be.
The Next Xbox could basically be a PC
The Xbox brand as a whole is almost definitely moving away from the idea that you need this one specific box to enjoy the Xbox ecosystem. As a specific step forward, I’m going to propose a hypothetical operating system that will henceforth be referred to as Xbox OS. This is pure speculation, but I would imagine that it could be a stripped-back version of Windows with a gaming-centric core interface, similar to Valve’s SteamOS that is used on Steam Deck. Microsoft owns Windows, so it could develop its own controller-first fork that is well-suited to living rooms and handheld devices. Without needing to rely on an open-source OS like Linux, native compatibility with PC games would be a strong selling point to both consumers and developers.
While the Microsoft Store and Game Pass would obviously be front and center, it could potentially be open enough to allow users to install other storefronts like Steam or Epic Games, as well as other software like emulators.This model could land anywhere from a tightly controlled ecosystem to something more open-ended like SteamOS. They could strictly limit the usable software to what’s available on the Microsoft Store, or they could take the SteamOS approach where using the first-party store is heavily incentivized by being seamlessly integrated and feature-rich, but the option is open for using third-party stores if you don’t mind some clunkiness and tinkering.
Console manufacturers have historically kept their storefronts and software libraries as walled gardens; you can’t buy a game for one console and play it on another. The main reason for this is because each of the companies that produces a console takes a percentage cut of all software sales. Opening up the ecosystem to allow any storefront the user wants would definitely take a chunk of that income away, but I don’t think this risk definitively precludes the possibility of this theory becoming reality. After all, Microsoft seems to already be transitioning Xbox into a software publishing and subscription brand. Their recent moves suggest they might be willing to fully embrace an OS-licensing, software publishing, and subscription model. For instance, even though Xbox has a lineup of first-party games and a Microsoft Store on Windows through which to sell them, they have also been offering those very same games on Steam and Epic. The key might lay in properly incentivizing users to stay within the first-party ecosystem through sheer convenience and seamless integration into the OS.
Keep in mind that while Windows has consistently been the dominant operating system for personal and business use, for the vast majority of Microsoft’s existence the company did not manufacture its own PCs. While various peripherals were offered, it wasn’t until the launch of the Microsoft Surface line in 2012 that they fully committed to selling full-featured PCs designed to run their flagship OS. Before that, Microsoft was primarily focused on software and OS licensing, and even after entering the PC hardware market, their presence hasn’t significantly disrupted the broader industry. It’d be working from a reversed position as compared to their history with Windows, but if they were to take a similar approach with Xbox by making their first-party Xbox machines just one available option amongst a selection of licensed devices from partnered manufacturers, it remains to be seen what effects that would have on the gaming market.
How would this hypothetical OS work?
The idea I’m proposing is basically just a Windows-based SteamOS. Not very creative, but why try to fix what isn’t broken? While it should launch into the gaming mode by default, It could still have a desktop mode of some kind like SteamOS does to allow advanced users to get the most out of it. As for how much flexibility you would have with this interface and what limitations Microsoft would impose, I could see it going a number of ways. Many mainstream users just want an easy-to-use console they can plug in to their TV and use comfortably from their couch; they may have been intimidated by the potential tinkering required in much of PC gaming. A streamlined OS focused on playing games could be a great way to retain those more casual users, but also provide numerous options for power users.
Whatever form the next generation of physical Xbox hardware takes (if it even exists at all), it would likely need to retain compatibility with previous Xbox software. Under this Xbox OS model, new software would essentially just be the PC versions of games. There would be no need to create a specific “Xbox version” of anything; it could essentially run the same base version you would find on the Windows Microsoft Store (basically the same version on Steam, Epic, GoG, etc.). To make it easy on the layman consumer, the company would likely want to be extremely transparent about what games are well suited to the specs of their official hardware, incentivizing game publishers to include performance presets tailored to their consoles and leveraging a comprehensive verification system akin to Valve’s “Steam Deck Verified” label. Naturally, they would also want the storefront to place the titles that are designed for the console or otherwise work great on it front and center.
Making a gaming-centric OS based on Windows could also open up the third-party gaming PC market even more. They could license it out to other manufacturers. Companies like Asus, Dell, and Lenovo could sell Xbox OS-based gaming PCs, expanding both their appeal and Microsoft’s reach in the hardware market. Additionally, handheld gaming PCs, like ROG Ally and Lenovo Legion GO, have arguably been held back by the bloat and clunkiness of having standard Windows 11 as their core operating systems; it’s just not a great fit for a physical interface based around controller inputs and a relatively small touchscreen. By marketing them as portable “Xboxes”, it could broaden their mainstream appeal significantly and draw more users into Microsoft’s ecosystem. Additionally, Xbox consoles have historically been sold at a loss, with the profit coming from software, subscriptions, and accessory sales. By letting other manufacturers front the cost of producing and selling a significant portion of the core machines, it could be an even better value proposition for Microsoft because of reduced risk. The OS could also be made available for consumers to install on any compatible device they want. You could turn any PC you want into “an Xbox”, ready for living room use. This would also allow users who want top-of-the-line graphical capabilities to unshackle themselves from the limitations of Microsoft’s first-party offerings; while the official Xbox hardware would likely need to remain competitively-priced, players with money to spend on more powerful rigs could still enjoy that core Xbox experience in higher fidelity.
While the PC stuff is all well and good, long-time customers would likely expect some form of backwards compatibility to stick around. Again, I’m no console architect, so I don’t know how feasible any of these ideas are. But perhaps Microsoft could build some form of emulation or translation layer into the OS, allowing users to access their previous purchases on Xbox systems (maybe even providing it as an official option for buying and playing Xbox games on PCs running standard Windows as well). As a slapdash solution, they could even have it boot into a full-on legacy mode or something, similar to how the Wii U had a separate Wii Mode for back-compat. It’s not an elegant solution by any means, but just slapping the entire Xbox Series X OS in as a separate boot mode is a potential option. In what I would call the least desirable option for me personally, Microsoft’s existing cloud infrastructure could help bridge the gap by streaming older Xbox titles on devices that do not natively support them.
While all of this pure, unadulterated conjecture that should be taken with a portion of salt so heaping that it's dangerous for your blood pressure, I ultimately think it’s clear that the Xbox brand is evolving beyond the traditional console model. Whether Microsoft fully commits to this PC-like future or maintains a distinct console identity remains to be seen—but all signs point to a shift that could redefine what an Xbox, or a console in general, even is.