An 'Xbox handheld' isn't just likely. For Microsoft, it's absolutely necessary.

Xbox handheld? written via Photoshop on an ASUS ROG Ally
(Image credit: Windows Central)

If you're inside the gaming social media bubble, you'll probably be aware of non-stop discourse over Xbox's hardware sales. 

And yes, it isn't selling as fast as the Xbox One did, but people often overlook the fact that, far more so than ever, games are cross-gen compatible. Fortnite, Minecraft, FIFA, Call of Duty — the vast majority of the world's biggest games are launching across both Gen 9 and Gen 8, including Xbox One S and the original PlayStation 4. 

The discourse revolves around comparisons to Sony's PS5 sales specifically, which are growing incredibly rapidly when compared to Xbox Series X and Xbox Series S. But the overall global market share of consoles isn't going up at the same rate by a long shot, and neither Xbox's or Nintendo's console market share isn't decreasing in any meaningful way overall either. In SEC filings which have to be accurate for legal reasons, Microsoft describes its console engagement as being higher than ever, although they decline to give exact figures. 

So, giving Microsoft the benefit of the doubt for the sake of argument, people are either buying multiple consoles for different ecosystems as companion devices, or the big two are simply servicing their established, digitally-locked in consumer base. Sony is undoubtedly doing a better job of moving PS4 users to PS5, with a stronger line-up of nostalgic, well-known franchises. I would argue that Xbox owners are probably considering PlayStation consoles as well at least for companion devices more so than the inverse — owing to single-player exclusives like Final Fantasy 7 Rebirth (which looks fantastic). But Microsoft is still in the game, with more users than ever across its ecosystem — of which Xbox One and Xbox Series X|S remains the largest chunk. Microsoft also just landed Palworld, the world's hottest game right now, as a timed console exclusive. It's hard to imagine that this isn't at least having some impact on console sales right now.

Either way, what about the future? If the overall console market share of the gaming industry isn't growing, and Xbox users are mostly happy where they are, be it Xbox One or Xbox Series X|S, where will Xbox's next big market come from? Xbox Cloud Gaming, Xbox Game Pass and PC gaming are undoubtedly have a role to play, but more than ever, I believe a new hardware category absolutely has to be in the mix as well.

Finding the next big Xbox audience

Microsoft is putting Xbox Game Pass everywhere and anywhere it can to try and find new users, including the Meta Quest.  (Image credit: Meta)

Microsoft has a huge regulator-sized problem with regard to its wider ambitions. Yes, Xbox has acquired Activision-Blizzard, which ended up costing more than $75 billion dollars (and 1900 layoffs ...), and with that comes a large PC and mobile gaming presence. But Xbox console hardware, and the Xbox console ecosystem remains the core of the Microsoft Gaming umbrella. You can't sell Xbox Game Pass subscriptions, Fortnite microtransactions, or copies of Gears of War 6 without platforms upon which to do that. And as I've outlined in previous articles, outside of Xbox console hardware, Microsoft has huge barriers and massive competition to overcome towards reaching those customers. 

On PC, Microsoft has to compete with Steam. The fact that many millions of players would rather buy games like Starfield and Palworld outright at full price on Steam, rather than play it on PC Game Pass for a monthly fee, showcases just how strongly attached people feel to their existing purchasing habits. Accessing iOS or Android gamers is also an uphill battle, since Apple and Google makes doing business on iPad and iPhone as difficult as possible for competing corporations. Microsoft is betting that regulators will force Apple to allow it to put a Steam-like mobile game store onto iPad and iPhones, and I can't help but feel like that's naïve — but I'm also admittedly not the most optimistic person in the universe. Xbox Cloud Gaming is also insanely expensive to run. And even with Google allowing its existence on Google Play, all in-app purchases are blocked by policy, creating a huge barrier to profitability and scalability. NVIDIA GeForce Now also offers a better experience, and more and more people are starting to realize that as the cloud gaming market grows. 

It's only really within Xbox console hardware that Microsoft can offer a complete experience right now. But let's disregard my pessimism for Microsoft's activities on competing platforms. Even if Microsoft is the most optimistic company on Earth, betting on Apple and Google welcoming Xbox Game Pass and in-game purchases with open arms — covering all their bases with a diverse array of Game Pass endpoints would be a far smarter business bet. There is one hardware paradigm that will overcome all of these potential hurdles, while also helping Xbox find a totally new audience. 

New battles to control your eyeballs

The ASUS ROG Ally is the closest thing we have to an Xbox handheld right now, but it's missing the vast majority of my Xbox games, and my Xbox games' progress.  (Image credit: Windows Central | Jez Corden)

While we're probably still a few years away from the general availability of Elon Musk's primate-slaughtering Neuralink brain implants, companies are still trying to figure out ways of interrupting your gaze with products and sales. Apple's Vision Pro and Meta's Quest are hoping they can get you to put down your potentially-competing device, TV, or laptop, and co-opt your entire field of view, volunteering your perception of reality in favor of a curated one — offered by them and their advertisers. Meta is wholly constrained by Apple and Google's app store rules. So, Meta wants you to put down your phone and use their headsets instead, where it can do whatever it wants. Right now, Microsoft (and PlayStation for that matter) have a similar barrier to further growth. Struggling through Apple or Google's prohibitive rules about who can succeed on their platforms is a huge hindrance to finding new audiences for premium games like those served by Xbox and PlayStation. 

PlayStation and Xbox both know this, with decreased operating margins faced with ballooning costs, and a flat overall global console market share. Let's presume that PlayStation does succeed in completely killing Xbox, where would they go from there? Capitalism "demands" perpetual growth, so at that point, simultaneous PC launches and multiplats become ever more likely, the further out we go. But what if there was another way to find new users?

Rumors began to swirl this week that PlayStation is exploring a native gaming handheld, with the power to run PS4 games. We've certainly seen chips that are approaching these kinds of capabilities. My ASUS ROG Ally can reliably run most PlayStation PC games without issue, from God of War to Horizon Zero Dawn, albeit with some compromises and caveats. It's not quite a PS4, but it's thoroughly playable, and thoroughly portable too. With the ASUS ROG Ally and Steam, PlayStation has turned me into a customer. Now what if PlayStation could preclude Steam (and its cut) from the process entirely? What if I'm someone who doesn't have room in my life for a PS5, but very assuredly does have room in my life for a dedicated, native, non-cloud PS4 handheld? These are questions both Sony and Microsoft are asking themselves right now, in a world where finding new audiences is absolutely critical. 

(Image credit: Microsoft / FTC)

I know from talking to sources familiar with Microsoft's plans that an Xbox handheld has been discussed and considered for some time. But you don't need to take my word for it. Leaked documents emerging from the FTC trial over Activision last summer confirm that Microsoft was exploring an Xbox handheld, but back in 2020, described it as "out of scope for first party." Microsoft is working with third-parties on handhelds, with devices like the ASUS ROG Ally and Lenovo Legion Go. But, one of the biggest drawbacks of the ASUS ROG Ally and similar PC gaming handhelds is the Windows OS, which isn't designed for touch, small screens, or frankly gaming itself in some cases. Many users don't want to deal with the complexity of Windows in general, which is why Steam is finding new audiences with its simple-interface Steam Deck, which plays all your favorite Windows games without the bullshit of Windows itself. 

It really is the Steam Deck that has changed the game here. You now have Steam effectively selling PlayStation and Xbox's games to a totally new, handheld audience, while also taking a cut for the privilege. Steam is essentially using Microsoft and PlayStation's own games as a vessel to grow its console platform. And while yes, you can boot up Linux and use the Steam Deck as a "PC," the vast majority of users are using it as you might a Nintendo Switch. A gaming-focused, handheld gaming console with none of the annoyances that come with PC gaming. 

For Sony and Microsoft both, they'd have to be insane to not at least be considering how they can get in on this action. Both companies have industry-leading hardware teams, and both have been incredibly late to this incredibly exciting handheld party. And for what it's worth, I have reason to believe now, more than ever, that an Xbox handheld is within Xbox's future. 

Beyond gaming, an Xbox handheld could become a necessity for cloud, A.I., and general computing

The ASUS ROG Ally is a great device, but the Windows 11 experience on handhelds leaves a lot to be desired.  (Image credit: Windows Central | Jez Corden)

Microsoft CEO Satya Nadella lamented a short while ago that killing Windows Phone was a mistake, but why? During regulatory hearings, he also described how Apple and Google control the "default" apps on their platforms, while also weaving prohibitive rules to prevent other businesses from succeeding on the platforms, limiting innovation and consumer choice. Of course, he wants to make money, but he's also not wrong. In a universe where Windows Phone still existed in any meaningful way, Microsoft may face fewer barriers for its gaming, cloud, and A.I. ambitions on mobile platforms. 

Cloud gaming would be far more viable tech if Apple and Google allowed them to exist and monetize freely on their platforms, giving developers access to millions, maybe even billions more consumers to further innovate and develop content. You know, like Windows does, and has, for the past several decades. Steam couldn't exist if Windows was closed like iOS is, and potentially neither would Google itself. And Microsoft itself lost an anti-trust case in the early 00s that, you guessed it, revolved around Microsoft making it difficult for users to switch to Google and Chrome on Windows. 

So while Microsoft's arguments aren't necessarily altruistic, they're also true. The fact that Google and Apple control the default apps on their platforms will also harm Microsoft's and other's ambitions, from the smallest companies to the biggest corporations. They also hurt Microsoft's A.I. ambitions, their cloud ambitions, they also hurt Microsoft's Office and business ambitions. And of course, they hurt Microsoft's gaming ambitions. There's a limited version of Xbox Game Pass on Google Play, and Apple blocks Xbox Game Pass entirely on iPad and iOS, pending some changes forced through by UK regulators recently. And even then, Apple is known for its malicious compliance of regulatory decisions, abusing gaps in the legalese to work out ways to avoid full-blown capitulation. 

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Microsoft and PlayStation could spend billions to circumvent these natural barriers to new gamers. Or, they could spend far less money developing handheld hardware endpoints that they can fully control. Nintendo Switch, Steam Deck, and others have more than proven the concept. Handhelds can be stronger as companion devices, owing to their smaller footprint. They are also portable, allowing users to play away from their TV. They are also native, being less costly to run, and can be used in places with no internet reception. It just makes sense, no matter how you look at it. Microsoft and Sony could also bake their entertainment services into the devices, with Microsoft Movies & TV and Sony's Crunchyroll platforms, without having to give a cut to Apple and so on. They could open up their platforms to app developers for things like Netflix, and they would also be a mobile endpoint they could control for integrating users on future A.I. products. Hell, put Microsoft Office on it so I can write articles on the train ... you could also add telephony so I could make calls on it like Windows Phone ... okay maybe that's too far.

Jokes, rumors, and leaks aside — for me, cold hard logic dictates that handheld gaming is absolutely in PlayStation and Xbox's future. And I'm here for it.

Jez Corden
Co-Managing Editor

Jez Corden a Managing Editor at Windows Central, focusing primarily on all things Xbox and gaming. Jez is known for breaking exclusive news and analysis as relates to the Microsoft ecosystem while being powered by caffeine. Follow on Twitter @JezCorden and listen to his Xbox Two podcast, all about, you guessed it, Xbox!

  • Jez Corden
    Would you grab one?
    Reply
  • Cmndr_Bytes
    Depends on price of course but I probably would. I use my iPad now to cloud game when i'm away from my console. It fills a void. Would be great to have a hand held made by MS and dedicated to their systems. They would need to step up their game though on the back end. The waiting in the queue with the little rocket ship streaming by is not a good look when trying to establish a footprint in cloud gaming.
    Oh and then there is the concern of someone, not naming names, deciding to kill the device if it after a year did not make a BUHillion zillion dollars. I don't want another MS device in my junk drawer.
    Reply
  • bazanime
    They already have many handhelds on the market, they just need to tighten up the software on these devices so when you game on them they feel like an Xbox dedicated system. At the press of a button, the device is in gaming mode, all unneeded functions and background resources are disabled or paused, and the user can just game. It can be done.
    Focus on software to empower the existing very capable third-party hardware to produce a first-class service.
    My phone feels great whilst on the Xbox Cloud game pass, with very few delays and games playing fluidly.
    Reply
  • GraniteStateColin
    Just on the topic of Sony vs. MS in the console space, one small data point of myself: for the first time in several years, I fired up my old PS3 (yes 3), because I wanted to watch an older Blu-ray 3D movie and I was surprised to learn that the Xbox Series X couldn't do it. My older Xbox One and One X could, but those are now in now my son's and daughter's rooms.

    I like my Series X, but to this day, I resent how badly they nerfed all the entertainment features we had in the Xbox One era. I appreciate they needed to cut stuff to improve the gaming capabilities without incurring skyrocketing costs, but I wish they had at least offered add-on support for voice control and facial recognition for sign-on (I used to call out from the kitchen to turn on the Xbox, the AVR, and TV all at once so it was ready to watch or play by the time I got into the room), HDMI pass through for TV, 3D Blu-ray support, etc. I think a lot of us who valued those Entertainment and control features as part of the reasons we bought the Xbox One in the first place would have paid extra to retain some of those features on the next gen console. I completely get that we're a minority, so make us pay for them, but don't just remove the features and break our experience. Instead, in a classic turn-your-back-on-your-fans approach, MS just "hit reset" as Nadella says and discarded all of us.

    This does make me feel that MS is pushing me to buy Sony for my next system.

    Positive note: I do deeply appreciate that at least all our games carried forward from Xbox One to Series X. On that front, they did do right by their customers and fans.
    Reply
  • GraniteStateColin
    Great piece, Jez. Completely agree on the handheld opportunity from a business perspective. I don't know that I personally would get one -- my serious gaming tends to be planned for specific times with family when we're all together in the family room, at least right now. Nevertheless, I think you're exactly right on the opportunity and strategic reasons to do it.

    Also, I think this actually ties even more tightly to Windows Phone, not just looking backward to the missed opportunity, but also looking forward to how they could still use gaming to help their own mobile needs: MS is in a unique position to leverage its gaming footprint to appeal to users for a mobile ecosystem. Combine that with Office and they could build a brand of "Work Hard. Play Hard" with the best in gaming and the best in productivity, all running on a new Surface Phone or mobile device.

    I'd like to see them offer two mobile devices in the same family:

    1. A Switch/Steam Deck-sized device, just as you've described, but with an option to include phone features (dialer, speakerphone, etc.) and a pair of Bluetooth earbuds that recharge inside the device (carrying around separate Bluetooth earbuds is an unnecessary hassle for a device that size)

    2. A smaller pocketable device that like the Surface Duo, but with the full gaming features built-in and maybe some hardware controls in addition to the touchscreen (at the size, obviously can't be as good as the larger unit).

    For the reasons I gave above, I wouldn't go for #1, but I would go for #2. If they offered a Game Pass Family plan with Cloud Gaming access for all family members with this device, I wouldn't just buy 1, I'd get one for each member of my family.

    These should include optimal experiences for both Office and Xbox gaming. They should also put some work back into community competitive and achievement features like Gamerscore and ensure that at least all their own first-party games (now including all the King games) can feed into that, so that many gamers would want to use these devices to grow their score.

    This is the right way to leverage the synergies in their respective areas of strength. Alas, I don't see that MS looks at any of their opportunities holistically like this. I think they believe that if you use Excel, you don't play games and vice versa, so instead of unifying these, they pit the two business units against each other like a Hunger Games fight when it comes time for their respective leaders' annual reviews. I can assure that most young adults think of themselves as gamers first and don't really care about the business features, but if you give them a way to have a prestige device for work that also provides the best mobile gaming experience, that's a winner.
    Reply
  • fjtorres5591
    Me, no.
    I'm a couch gamer; inhouse only.
    If I need to kill time outside--say the doctor's office--I'll just read an ebook.

    Others? Dunno. MS can reach a lot of those likely gamers by just reemphazing Play Anywhere (they don't promote it enough) and Windows portables, which is a crowded market.

    The question here is, could MS get the Series S SOC down to a low enough power draw to fit into a handheld they can sell for $500 by 2025.
    If not, all the speculation in the world will amount to nothing.
    Do remember, MS looks at many things the end uo on the "cutting room floor".

    MS ANDROMEDA ring a bell?
    Reply
  • bazanime
    GraniteStateColin said:
    Just on the topic of Sony vs. MS in the console space, one small data point of myself: for the first time in several years, I fired up my old PS3 (yes 3), because I wanted to watch an older Blu-ray 3D movie and I was surprised to learn that the Xbox Series X couldn't do it. My older Xbox One and One X could, but those are now in now my son's and daughter's rooms.

    I like my Series X, but to this day, I resent how badly they nerfed all the entertainment features we had in the Xbox One era. I appreciate they needed to cut stuff to improve the gaming capabilities without incurring skyrocketing costs, but I wish they had at least offered add-on support for voice control and facial recognition for sign-on (I used to call out from the kitchen to turn on the Xbox, the AVR, and TV all at once so it was ready to watch or play by the time I got into the room), HDMI pass through for TV, 3D Blu-ray support, etc. I think a lot of us who valued those Entertainment and control features as part of the reasons we bought the Xbox One in the first place would have paid extra to retain some of those features on the next gen console. I completely get that we're a minority, so make us pay for them, but don't just remove the features and break our experience. Instead, in a classic turn-your-back-on-your-fans approach, MS just "hit reset" as Nadella says and discarded all of us.

    This does make me feel that MS is pushing me to buy Sony for my next system.

    Positive note: I do deeply appreciate that at least all our games carried forward from Xbox One to Series X. On that front, they did do right by their customers and fans.
    They are pushing you to the people who indirectly forced them to "Nerf features" just to compete? Doubtful!
    Unfortunately, mindshare is still entrenched in the competitor's grasp due to nostalgia and first dibs on studios.

    Fortunately, in the past years, Xbox has been more fan-focused than the competitor and has provided services accordingly.
    Dont flee! Support the resurgence of the brand.
    Reply
  • GraniteStateColin
    bazanime said:
    They are pushing you to the people who indirectly forced them to "Nerf features" just to compete? Doubtful!
    Unfortunately, mindshare is still entrenched in the competitor's grasp due to nostalgia and first dibs on studios.

    Fortunately, in the past years, Xbox has been more fan-focused than the competitor and has provided services accordingly.
    Dont flee! Support the resurgence of the brand.

    Sorry, to be clear, I'm not leaving Xbox, frustrated as I may be with MS for dropping features that mattered to me (even if I accept they have data showing they don't matter to most users). I just meant that they are pushing me to at least also use the competitors system. And if I have a total budget I'm willing to spend on systems, and I spend some on Sony, then that reduces the amount I have left to upgrade our Xboxes from One to Series S or X, slowing down how quickly I move us from last generation.

    In short, MS' lack of perseverance is discouraging, whether it's Windows Phone, Surface Duo, Live Tiles, Skype integrated into Windows, Kinect (or just a separate voice control and support for even off-the-shelf third-party Hello-capable cameras for facial recognition login), 3D, HDMI-in for TV, and so much more. Every time they launch something and cancel it before it reaches maturity, I learn more and more not to trust MS to try anything they have. And if no one trusts them to try their new stuff, then logically, that means everything new they launch will fail. They need early adopters to evangelize the good stuff, but they keep squirting those of us who try to help them like a bad cat scratching their furniture. Eventually, we'll learn to stop helping.
    Reply
  • BINARYGOD
    " I would argue that Xbox owners are probably considering PlayStation consoles as well at least for companion devices more so than the inverse — owing to single-player exclusives like Final Fantasy 7 Rebirth (which looks fantastic)."

    A study linked to on that console sales website (vgcharts?) showed that the number one second console among people with 2 or more consoles was the Series S.

    Also, given the year MS has ahead of them, and the fact that I doubt most Xbox owners care that much about the second entry in a somewhat-controversial game series remake they cannot get the first one to, I doubt most Series 1 owners will be rushing out to get PS5 is they didn't do that already give the existing catalogue and backwards compatibility.
    Reply
  • BINARYGOD
    "Many users don't want to deal with the complexity of Windows in general, which is why Steam is finding new audiences with its simple-interface Steam Deck, which plays all your favorite Windows games without the bullshit of Windows itself. "

    My lord, I bite my tongue on most of it, but you really do write like you just plain do not understand PC gaming at all - on top of all of the many other things you clearly don't really know anything about.

    Valve's handheld is selling well despite the not-installed-by-default Windows, which by default, restricts its gaming potential. Did you happen to know that dual booting into Windows was rather popular on the device?

    Did you notice that all other handhelds have Windows, and that the main reason they sell less is that Valve is Valve and those other companies are just not as (unfortunately) beloved as Valve, and Valve gives you way more the money because the cost is offset with Steam earnings.

    While I am sure, QUITE sure actually, that the anti-MS PC gamer who might care about a handheld loves that the deck is default linux, that's not really saying much about a portable xbox (or even saying much about most Desk users either).
    Reply