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When Microsoft first announced its intention to enter the games console market almost exactly 25 years ago, there was a widespread assumption that the Xbox would essentially be a stalking horse for the Windows operating system.

It seemed like a strategic move designed to ensure that, as powerful multimedia devices took over people’s living rooms, they would be an extension of the Windows PC rather than the ambitious new ecosystem which Sony was trying to construct around the PlayStation.

The form of the original Xbox seemed to confirm that assumption: built around relatively standard PC components, its operating system was an extremely stripped down version of Windows, with games being built on a variation of Windows’ DirectX frameworks.

Over the years, however, the expectation that the Xbox and Windows would essentially become joined at the hip never quite came to pass. Bits and pieces of Xbox’s branding and services offerings were built into Windows, but they never fully overlapped – not least, perhaps, because the battle for the living room that Microsoft had anticipated never really materialised, with PlayStation ultimately focusing on being more of a pure gaming play, and Microsoft’s most serious flirtation with multimedia functionality almost entirely sinking the Xbox One console.

A quarter century on from the original Xbox, however, Microsoft finally seems determined to bring Xbox and Windows together in a way that makes them more or less into a contiguous platform.

We had a few announcements over the past couple of weeks that don’t quite amount to an unveiling of the next generation of Xbox, but do at least point the way to what that will look like. We know that Microsoft has inked a long-term deal with AMD to continue providing components for its consoles – confirmation, if any were needed, that it’s quite serious about staying in the hardware business.

We also know, however, that the company is looking at providing Xbox services and compatibility to handheld gaming devices from third-party companies as well as building its own handheld Xbox, strongly suggesting that it envisages a future for Xbox that encompasses both Microsoft hardware and third-party licensed hardware.

Most tellingly of all, we also got a confirmation that the next-gen Xbox is going to be a much more flexible device than any previous console – it will not be locked to a single store, according to Xbox president Sarah Bond, who also fairly clearly stated that she sees the role of the next-gen Xbox being about ensuring Windows’ dominance of the gaming market.

The era in which Xbox and Windows were held at arm’s length from one another is apparently over; Xbox devices are going to be very explicitly considered as part of the Windows gaming ecosystem in future.

That all of this has been revealed in a somewhat piecemeal manner does seem to suggest that Microsoft is still trying to ease its core fans into this new reality, introducing new aspects of the strategy gradually to avoid the impression that it’s pivoting away from console gaming entirely.

If the company is serious about Xbox devices running Windows, then it also needs to be serious about how that version of Windows will be optimised and stripped down

Some people will still draw that conclusion, and honestly, it’s not entirely unfair – it just depends on how you define a “console”, because the next generation of Xbox hardware is likely to be the most expansive yet, comprising both handheld and home console models, but also likely to be the most similar to a range of gaming-focused Windows PCs.

Does an Xbox interface running over the top of Windows turn the device into a console? Probably not. But on the other hand, does quibbling over the definition of a console actually matter to very many people?

Still, there are reasons to be concerned about this approach, both for developers and for consumers. An Xbox ecosystem encompassing many devices with many different specifications, created by many different companies, is a tricky moving target for developers – very different from the static target of a console, or even the bifurcated target that Microsoft has presented with Xbox Series X and S.

That’s not an insoluble problem, but it’s a problem no less, especially if some consumers end up feeling like their Xbox makes them a second class citizen compared to someone else’s Xbox.

Arguably the bigger concern is that Windows doesn’t exactly have a sterling reputation for gaming performance on lower-end systems – like handheld consoles.

Only a few weeks ago we got confirmation that installing Valve’s Steam OS on handheld gaming devices could massively improve performance over having Windows on them – that story was very widely picked up and spurred a fair bit of criticism of how Microsoft has approached tailoring Windows for these devices, which makes the timing of this most recent announcement a bit awkward.

If the company is serious about Xbox devices running Windows, as it seems to be, then it also needs to be very serious about how that version of Windows will be optimised and stripped down.

Devices that chew through battery life, drag down frame rates, and run uncomfortably hot because of a heavy desktop operating system draining their resources will find it hard to compete in a market against more nimble competitors, whether they’re powered by Valve’s gaming-centric OS or simply in the form of Nintendo’s Switch 2.

Nonetheless, it’s hard to argue that Microsoft’s approach won’t work, for one key reason – it automatically has the buy-in of one of the world’s biggest and most important publishers.

Before Microsoft spent the best part of $100 billion buying out key publishers and developers, a move like this would have been risky, forcing the company to go cap in hand to third party publishers to try to drum up support. Now, although it’s not without inherent risk, it’s guaranteed to have a steady stream of major games for the new Xbox devices and for the Game Pass subscription service that will unite them. The software problem has been solved with some very dramatic chequebook moves, and that changes the competitive landscape in a way that has little to do with hardware design or strategy.

As we await more details of what these new Xboxen will look like, however, one major strategic question remains very pressing: who does Microsoft actually see as its rivals in this space? Perhaps it’s Sony, as it has historically been. More likely it’s Valve, whose Steam OS and Steam store poses a genuine competitive threat to some core parts of Microsoft’s business.

Yet competition is not a simple thing in this space any more. Microsoft’s publishing business is closely tied to the PlayStation, creating a symbiotic link between the companies. And although it was not directly stated, the implication of this week’s announcements was that Valve’s Steam store could actually be available on future Xbox devices.

Perhaps Microsoft’s real strategy is not to have any straightforward rivals – to treat the Xbox and its publishing business as an opportunity to lift all boats and profit in many different ways. If so, it’s that strategic vision, more than any other aspect of the next Xbox, that could really reshape the industry for the long term.

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