The Xbox Next will be more than a games/multimedia device they will turn it into a home console; not a games console. It won't simply be a device connected to the TV they will want all content to either pass through the Xbox via HDMI passthrough or be delivered via the Xbox itself. Microsoft wants people to always be using the Xbox in some fashion or another because the moment you switch HDMI input to say your cable box or blu ray player they cannot offer you any services but if they pass through the HDMI they can overlay over other content delivered like for instance with Skype calls when you're watching TV or immediately switch to the Xbox OS their device will always be available to offer service to the end user.
The big growth opportunities I believe they will target won't be games but pretty much everything besides games. The big growth opportunities for them will be in relation to apps for the home environment, education with natural voice recognition, shopping for things like clothes which will be easy to fit when your body is scanned by Kinect 2.0 and delivering content and computing power to remote devices like for instance with smartglass 2.0. Games alone won't justify any great increases in performance unless they can find other uses for that performance in general use scenarios and the market for games is only so big but with the cost of launching a top end console likely exceeding $1 Billion by a considerable margin the idea of a cheap simple console is a long dead one.
They won't be happy with users simply paying them $60 a year for Xbox Live and purchasing a few games, they'll want much more in the way of subscriptions and they will probably want to deliver the content themselves directly. They will likely push for different levels of subscriptions with the overall cost to the end user being between $200 and $500 per year ($15-40 per month) by the time you add up the movie, music and other content they will deliver via the internet. They probably won't move away from subscriptions but they will likely use them to heavily subsidise the cost to the end user so that if for instance you buy their premium package for a couple of years they will give you the console for free or next to nothing down.
I predict the hardware will be an 8 core Jaguar with half reserved at least initially for the OS/Kinect (Jaguar isn't designed like server chips so the two quad cores will be separate) with 8GB of RAM (5GB games, 3GB OS + Apps + Kinect libraries) and a ~1.5-2 TFLOP GPU (6-10* performance of Xbox 360 GPU). I believe they will follow the same design language as the Microsoft surface, I.E. sleek industrial design and peripheral venting which seems like a good application for console cooling in a confined space which will mean that they will do away with an optical drive as that is too much of a packaging compromise and not forward compatible to internet delivery of all content. They won't have any backwards compatibility except with games purchased as downloads which may be streamed for disc releases because the X86 processor probably won't be able to emulate the 360 efficiently enough.
Tease.
