Microsoft announced that it has begun work on its next-generation consoles at E3 2018, but did not provide detailed information about the new hardware. It could take years before we hear anything more from the company, but reports of follow-up to the Xbox One have begun to jump online in the last few weeks.
Last month, Thurrott claimed that the next family of Xbox devices was internally referred to as Scarlett and this week Thurrott's Brad Sams shared even more details about the future of the Xbox -Brand.
According to Sams, Microsoft is building two different devices for its next generation of game consoles. The first will be a traditional box in the style of Xbox One and Xbox 360. While local hardware may become redundant for gaming, Microsoft will continue to give players a physical box for at least another generation. Specifications for this device are still unknown, "since it's the early days of development for this piece of hardware."
The second device is the one that could really shake up the industry. Referred to by a source as Scarlett Cloud, the game streaming service, shown a few years ago at an employee-only meeting, will be the key to the second, cheaper device. Sources claim that the "cloud console" will not be as powerful as a traditional console, but that they can all play the same games with the new service:
The cloud console will have a limited amount of computing power locally for specific tasks such as controller input, image processing and especially collision detection. The disadvantage of this is that as more hardware is needed locally, it will increase the price of the streaming box, but it will still cost significantly less than we pay for a new generation console, which should help outreach Expanding the Platform  Xbox boss Phil Spencer has frankly said in the past that the final for his team should be Xbox games on every platform the consumer wants them to run, but the Scarlett cloud console will serve as an affordable entry point to play Scarlett games from scratch. All games running on the traditional console run on the cloud console and vice versa. The cloud console should even be developed further.
Sam points out that Microsoft's gaming services are often more profitable than their hardware – see: Xbox Live, Xbox Game Pass, etc. With all Scarlett games On its cloud, Microsoft could dictate the rules for subscription fees and its library for Exponentially more players open while they are charged for accessing them, even if they do not have an Xbox device. The year 2020 promises far-reaching changes that will change the industry forever.