Microsoft (NASDAQ:MSFT) could be developing a cheaper Xbox built for cloud-based games according to The console, codenamed Scarlett Cloud, will only stream cloud games instead of processing them locally.

This wouldn’t be a new strategy, since Sony‘s (NYSE:SNE) PlayStation Now delivers cloud-based PS2, PS3, and PS4 games via a subscription service on the PS4 and Windows PCs. NVIDIA‘s GeForce Now service also streams cloud-based PC games to low-end PCs and Shield devices.

However, Microsoft’s rumored console could be built from the ground up as a cloud-based console, one without enough horsepower to run games locally. The report also suggests that Microsoft will launch “Scarlett Cloud” alongside a new next-gen Xbox console that can run games locally and stream cloud-based games.

Scarlett Cloud is reportedly further along in the development cycle than its pricier next-gen Xbox counterpart, but both consoles could launch in 2020 to coincide with the rumored launch date for Sony’s PlayStation 5. But will a market for cloud-only consoles exist by then? Let’s take a closer look at the market to find out.

Understanding the cloud gaming market

“Cloud gaming” generally refers to games which are run remotely on high-end hardware, then streamed back to a gamer via an interactive high-quality video. This process requires a high-bandwidth connection, but it allows high-end games to be played on low-end hardware.

However, the creation of a true “Netflix of gaming” remains difficult thanks to bandwidth issues for many gamers. Microsoft already lets gamers stream Xbox One games to Windows 10 PCs over local networks, but that process is far less demanding then streaming full games over the internet.

Microsoft also offers Xbox Game Pass, a subscription-based service that lets gamers download (but not stream) a library of games to their consoles. It also uses its Azure cloud platform to stream assets into certain games like Crackdown and Rainbow Six: Siege.

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Article Credit: The Motley Fool

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