"First, Microsoft is building a traditional console that you would expect from the Xbox brand. I think it’s important to point this out so that those who prefer to have all their hardware locally, will have an option with the next generation Xbox.

As for specs for this device, that’s still not known at this time as it’s the early days of development for that piece of hardware. But what I am starting to hear more about is the second device, a streaming box that is designed to work with the company’s upcoming game streaming platform.

Scarlett Cloud as one person called it, is the game streaming service that we have all been envisioning ever since Microsoft showed off a demo game streaming at its all-employee meeting back in 2013. But this time, Microsoft has a path to bring it to market.

The second ‘console’ that the company is working on is a lower-powered device that is currently planned to ship with the next generation device that is designed for game-streaming. But the catch here is that Microsoft thinks it has figured out how to handle the latency sensitive aspects of gaming.

The cloud console will have a limited amount of compute locally for specific tasks like controller input, image processing, and importantly, collision detection. The downside of this is that it since more hardware is needed locally, it will raise the price of the streaming box but it will still cost significantly less than what we are accustomed to paying for a new-generation console which should help expand the platform’s reach."

"One person familiar with Microsoft’s plans said that this may reduce latency in all aspects of the game as well. If a multiplayer game is using Azure as it’s central server, Scarlett Cloud console will be closer physically to the multiplayer server resulting in less latency.

When it comes to games, all Scarlett games will run on all Scarlett devices. Meaning, both consoles will be first-class citizens and there is not expected to be an awkward ‘this game only runs on the non-cloud Scarlett’."

Source: https://www.thurrott.com/xbox/163896/details-microsofts-xbox-scarlett-game-streaming-service

If MS has managed a way to fix latency problems this could be pretty big. They could have the traditional console at $400 and the streaming  console at $150. This could help them sell more hardware. 

sounds interresting, wonder who will show the next gen first

Good Rumor...

Strange that they say it is on the early stages and have nothing on spec because other rumors had PS5 even releasing at 2018 without not even being officially talked they have a console in development while this one was said formally.

As any rumor will take it with a grain of salt.

That sounds indeed interesting. If they nail the latency issues and have a good price on their streaming stuff, I might own my first XBox.

Wouldn't surprise me. They're in good position to do so with Azure. I expect PS Now to expand next gen with higher fidelity, modern games, and access via app from as many smart devices as possible. I wonder is MS would do the same or lock it to this hardware.

Even if they nail the streaming price, they still have to worry about consumer limitations.

If this streaming platform is targeting the budget or cash strapped crowd, would one not have to worry about the fact that those same people may be data capped. Doesn't matter how good of pricing MS does compared to NVideo, if after 20 hours of playtime the consumer hits their data limit on their internet provider.

yeah.... doubt it, after the power of the cloud the last gen, and i think any reasonable person in charge would want to not do that. plus phil spencer even acknowledged that the tech isnt there yet in the E3 interview with giantbombs jeff gertsman. this is quite a rumor.

I mean by tech is speeds and infrastructure especially in the US.

Not interested in any streaming box device or anything related to game streaming.

The power of the cloud!

Because it worked out so well for them this gen..... I wouldnt get my hope up, guys.
Plus isnt there something to be said about owning the hardware that does the stuff itself? like less input lag? probably higher picture quality ect.
Not being dependent on the net.

Combined with the game pass... streaming could actually be a feasible option next gen... I’m sure I will still go for the traditional console though.