I know most people don't want to see an Xbox cost $1000, but I think it's for the best; here's why.

I have a theory about the next Xbox console with Microsoft say they are making. First lets add up what we know for sure:

1) They have said it'll be the biggest leap ever in tech terms
2) They are putting their games on PS5/Switch 2 as well
3) Sales for Xbox hardware has fallen off a cliff
4) Some 3rd parties (like Capcom) are starting to skip releasing Xbox versions of games because of the low sales numbers.
and
5) A rather long point, but important. Sony/Nintendo/Xbox sell their consoles at a loss or break even because they make the money back on game sales. This is the current business model and why consoles are cheap to buy considering the bill of materials to make them.

If Microsoft release yet another console, same sort of Spec as PS5 Pro/PS6 we know its going to bomb hard, and I'm sure Microsoft know this.

I really doubt a handheld device is really a viable business for Microsoft. If they can't get people to buy their home console, why would someone buy their handheld over a Switch 2 or Steamdeck? Also it's worth noting that even the Steamdeck has only sold around 5 million units.

So what market if left for Xbox to sell in?

I think if they are smart they will create a new market; a premium console market.
They could create a very high powered box and sell for around $1000-$1200.
Now clearly this is not a mass market device, but they have alread failed in that market so why try again?

No, I think the only viable business Xbox hardware can be in is a premium market. A high powered box, that gives users access to Gamepass, but also Steam.
Hopefully they could cut some sort of deal with Valve, to get an "Xbox certified" tag added to Steam games much in the same way you have "Steam Deck certified".

This way, they can make a profit on the hardware sold rather than on games, because lets face it, they are not making money on Xbox games.

The next xbox will very likely be sold for a profit and more expensive than usual consoles. But not that expensive, I don't see there being more than a tiny market for $1000-$1200 consoles. How many of these do you expect them to sell?

This kind of goes against their current marketing though of "This is an Xbox" MS has made it pretty clear they're not interested in trying to bring over PlayStation, or even Nintendo, customers to Xbox anymore outside of the core Xbox fanbase.

In order to coincide with their current marketing, they need to have at least more than 1 device offering. Everything is pointing to a handheld console from leaks, "likes" that executives have made on user posts about the potential of an Xbox handheld, but Xbox is most likely going to take it a step further.

Taking a page out of Valve's playbook, sell their own niche first-party hardware, but also license out the OS with a "Powered by SteamOS" type moniker, and have Xbox be on third-party OEM devices as well as their own first-party hardware. On top of having a premium console. This goes more in line with the "This is an Xbox" marketing. It's also not a new thing in the world of tech hardware. When you buy a laptop, it'll most likely be a Windows laptop, but you buy it for the cost or hardware capabilities of the laptop. Or when us PC users pick a graphics card, Nvidia and AMD sell their own first party cards, but I usually like to choose third-party cards from the likes of Asus or Gigabyte. Phil has said as much that they want to win on their unique hardware capabilities (something that has honestly been lost in the console space. Both PS5 and Series X are practically identical) rather than by software capabilities.

The biggest thing will be not selling their consoles at a loss. Therefore, they can afford to sell only like 10 million units, or whatever it may be, to the diehard Xbox fanbase because they're not losing any money on their now niche consoles.

EDIT: On a side note, that's not true at all about Capcom. The only games that were being skipped were the older remasters/collections that were made on Capcom's now outdated MT Framework engine that wasn't compatible with modern Xbox hardware that has since been rectified. That's why the Marvel vs Capcom collection was able to release, and now the upcoming Capcom Fighting Collection 2 and Onimusha 2 remaster will be releasing on Xbox at launch day. You'll notice it was only the PS4/PC/Switch platform releases that were skipping Xbox. Even now, they're releasing on Xbox One rather than Series consoles. It's an engine limitation. They can only be played via backwards compatibility.

I think the ceiling to a premium console market would be around 15-20 Million units right now.

But I do think there is a market for PC users who no longer want to deal with Windows nonsence but still want that power level.  This is think would be a bigger users base than current Xbox users.

I agree.
1. They want it to be the biggest generational leap yet. How can you have a huge leap from Series X without charging $700 and up for the console?
2. We have to accept that the odds of Microsoft bringing back true exclusives or even some timed exclusives to consoles are virtually nothing at this point. I don't think Xbox getting some exclusives will make it far more competitive with Nintendo and Sony.
An $800-$1000 Xbox 5 would scratch a market niche that is being overlooked. It would still be cheaper than some Gaming PCs of similar specs.

This could be nice as an option alongside a normal console since a console comparable to high-end gaming PCs when it launches would certainly have appeal to some people.

This is not the case for Nintendo, they've often sold their consoles for profit and have very much done so with the Switch considering the lack of price cuts in 8 years. Considering how outdated the Switch is at this point it's genuinely kinda wild they're still selling it and the OLED model for as much as they are.

It's no longer just about game sales.

It's about DLC, it's about subscriptions, it's about advertising, it's about services, it's about accessories.

Microsoft and Sony are tied to AMD technology.
AMD is a laggard in the graphics space currently... But extremely competent in the CPU space.

But there is a massive focus on generative A.I. And that is where we are going to see the "biggest leap ever". - Think about generative A.I that can increase polygons, increase resolution, increase framerates, increase details, increase texture resolution all at the same time.

And this is where the biggest investment in GPU technology is currently... And this is what Sony and AMD started to plan for with the Playstation 5 Pro... It's just a taste of what is to come over the next couple of years.

As for the success or failure, nothing is set in stone yet... Let's not make assumptions before the console has even been unveiled yet.
Many thought the Switch was going to be a failure once the WiiU bombed... And look how that turned out.

Clearly Microsoft isn't going for a "single device fits all" strategy here, that trajectory has been clear for years.

Microsoft approach is "many platforms, one software".

As for the Steamdeck, you need to remember the Steamdeck is competing with another dozen devices like the ROG Ally, Legion Go and more. - The Steamdeck is also not subsidized.
Do we collectively include the sales of all Portable PC's? Or just single out a single device? If that's the case, why shouldn't we exclude the Switch Lite and OLED from switch sales? Or PS5 Pro/Xbox Series X from Playstation 5/Series S sales?

It's the overall platform that matters... For example, Alienware might only sell a few million gaming PC's, but that's not representative of the entire gaming PC market. It's still a PC platform.

It's the platform that actually matters.

I hope they have a device that caters for every market.

Why only put a few apples in one basket when you can have an apple in every basket?

We are all gamers here, we all like different games... And we even like all different platforms, there is literally nothing wrong with that.

Didn't Microsoft's gaming division just post the most money they have ever made?

Hardware tends to get cheaper over time. The Xbox Series X/Playstation 5 are built on archaic 7nm technology. - Respun at "6nm".

Newer chips built at smaller fabrications processors should allow for tangible increases in capability.
But there is also the added capability that generative A.I is enabling, this is the biggest paradigm shift in graphics rendering we have ever seen since the transition from 2D to 3D.

On the one hand, this would at least fill a specific niche and provide a reason to buy an Xbox; to get the best console experience for multiplatform games and appeal to those who want the best graphics but prefer the convenience of a console over a PC.

On the other, I can't imagine that many people will be willing to pay $1000+ for a system with no exclusives. It would appeal to a relatively small niche.

One thing's for sure, if there is indeed a next Xbox, then they need to do something radically different, because it's clear that their current strategy of making an alternative Playstation isn't working.

If they release a VR headset with it, then it's day one for me. But I doubt MS is interested in VR anymore.

I bought the PS5 Pro since it also helps PSVR2. Laying out $1000+ for just flat games simply doesn't fly for me anymore. I might as well go PC in that case and have PCVR.

I don't see the point of them making another Xbox. If you say because Sony, that line was already washed away.