I feel like a broken record, but I’ve been writing for more than a year that the next Xbox console will be more PC-like. Now, I think Microsoft just teased its next-gen Xbox plans while announcing its partnership with Asus to bring two Xbox Ally handhelds to the market later this year.
The Xbox Ally handhelds run Windows, but the Xbox team has worked with Windows engineers to boot these PC handhelds into a full-screen Xbox UI. The Windows desktop doesn’t even fully load, and you use the Xbox app UI as a launcher to get to all your games (even Steam titles) and apps like Discord.
While the combination of Windows and Xbox here is intriguing, it’s the way that Microsoft is positioning these devices that really caught my attention. “This is an Xbox,” said Microsoft during the reveal, clearly expanding its marketing push beyond a single console to every screen and device.
It all felt like a true Xbox handheld reveal. There was even an 11-minute-long behind-the-scenes video on the Xbox Ally handhelds, filmed in a similar style to Microsoft’s “Project Scorpio” Xbox One X reveal from nearly nine years ago. “This is a breakthrough moment for Xbox,” Carl Ledbetter, a 30-year Microsoft design veteran, says in the video. Ledbetter helped design the original IntelliMouse, the Xbox 360 Slim, the Xbox One X, and plenty of other Microsoft devices. When Ledbetter is involved, you know it’s more than just a simple partner project with Asus.
“For the first time, a player is going to be able to hold the power of the Xbox experience in their hand, and take it with them anywhere they want to go,” says Xbox president Sarah Bond, in the same video. Microsoft thinks of the Xbox Ally handhelds as Xbox consoles with the freedom of Windows, and I think the next-gen Xbox is going to look very similar as a result.
Microsoft’s own Xbox handheld was reportedly “sidelined” recently, and I’ve heard from insiders that it’s essentially canceled as the company focuses on Xbox’s new software platform. I still think we’ll see next-gen Xbox hardware from Microsoft, but I also strongly believe we’ll see multiple devices from PC makers like Asus that will also be considered next-gen Xbox consoles.
That’s because the next-gen Xbox platform is being built in the open, with devices like the ROG Xbox Ally and Xbox Ally X. These handhelds seem like a market test for where Microsoft goes next with the combination of Windows and Xbox, and the company’s goal to turn any screen into an Xbox.
Microsoft Gaming CEO Phil Spencer made it clear in an Xbox podcast earlier this week that the Windows and Xbox teams are working more closely than ever. He also revealed this is to make the PC gaming experience more console-like:
This is the tightest collaboration I’ve seen between the gaming organization and the Windows team in my three decades at the company. For 25 years, almost, we’ve been working on a console experience where you turn it on and it works and your games are there, and how do we bring that to the Windows ecosystem so you get the freedom of Windows to use the storefronts and the apps you want to use, but it feels like a device that’s purpose-built.
There are plenty of technical challenges on the Windows side to fix, but these new Xbox Ally handheld devices also demonstrate a challenge for Microsoft: it’s about to sell an “Xbox handheld” that won’t run most Xbox console games natively. I’ve seen plenty of hands-on YouTube videos claiming this is a true “Xbox handheld,” but very few make it clear that it’s actually only natively running PC games.
Microsoft’s Xbox Play Anywhere effort lets you buy an Xbox game and get the PC version, but only a small amount of Xbox games and publishers are currently part of this. This isn’t an issue for Microsoft’s own first-party Xbox games, as they've been publishing to PC for years now, but upcoming games like Grand Theft Auto VI won’t run on these Xbox handhelds. You’ll have to stream Grand Theft Auto VI instead, until the PC version, which hasn’t been announced yet, is released.
I think most consumers won’t even realize this is the case as Microsoft is already heavily marketing these handhelds as Xboxes. Xbox fans were going wild during a watch party, but as soon as the ROG logo appeared the room got a lot more subdued. This highlights Microsoft’s brand challenges here and why Xbox fans are cautious when it comes to the complexity of a PC and the future of their game library. Either way, the real benefit of Microsoft’s approach is access to Steam PC games and even PlayStation PC titles on “Xbox handhelds,” so Microsoft should lean into that selling point initially.
Over the long term, I think Microsoft will eventually solve this challenge through emulation. Bond created a new team focused on game preservation and forward compatibility in early 2024, but there are technical and licensing hurdles to overcome before original Xbox, Xbox 360, and modern Xbox games can run emulated on a PC.
Until Microsoft is ready with emulation, it’s filling the gaps with Xbox Play Anywhere and Xbox Cloud Gaming streaming instead. Microsoft’s Xbox app on PC will simply show your recently played games, and then you can just play them — whether it’s natively or streaming through the cloud. Microsoft has already done all the important work for cloud saves, so this makes the experience a lot more seamless.
All of this work is moving in a direction that Microsoft keeps talking about: choice. Instead of buying one Xbox console from Microsoft, what if you could buy Xbox consoles from lots of PC makers without ever having to see the complexity of Windows?
Microsoft is going to change the next generation of game consoles if it can pull this off. The company is already opening up its Xbox PC app to list Steam games, so having the ability to run Steam games on next-gen Xbox consoles doesn’t feel all that far-fetched anymore.
I don’t think Microsoft is doing a bunch of Windows and Xbox work just to have this software running on handhelds. I think this work will give Microsoft the ability to control the console-like experience and UI on a variety of hardware, in a way where it can upsell Game Pass, its own Xbox PC games, and more. Microsoft is already in a handheld gaming PC race against Valve and SteamOS, but that’s a smaller battle in the war to define the next generation of video game consoles.
As I've written plenty of times before, the key to this next-gen Xbox platform will be Microsoft’s execution. It has everything it needs to make this approach a success, but Microsoft’s focus on gaming on Windows has been disastrous in the past. With the Windows and Xbox teams now working together more closely than ever before, it’s make or break time for a new Xbox platform that looks like it’s going to extend far beyond the confines of a handheld PC.
