Xbox’s Steam Power Play
A new rumor suggests Microsoft’s next Xbox consoles might include Steam and Epic Games Store integration through the Microsoft Store. This potential shift would mark a significant departure from traditional console walled gardens, with Xbox potentially becoming the first major console to offer access to PC gaming’s largest marketplaces.
According to YouTuber eXtas1s, Microsoft has begun testing a “Steam DF Beta” app within the Microsoft Store environment. This testing appears to be limited to certain employees and Microsoft collaborators, but signals a clear intention to bridge the gap between Xbox and PC gaming ecosystems.
The leak, first noticed on gaming forum ResetEra, claims the next-generation Xbox will ship with Windows OS installed and feature both Steam and Epic Games integration. While this should be taken with significant skepticism—eXtas1s has shared incorrect information about Nintendo Switch 2 in the past—multiple Microsoft insiders have previously hinted the next Xbox will essentially function as a PC.
What makes this rumor particularly interesting is that Xbox head Phil Spencer previously expressed interest in bringing storefronts like Epic Games Store to Xbox consoles. Microsoft even accidentally leaked concept art showing a Steam filter in the Xbox app for PC before quickly removing it—but not before it was widely noticed.
Is it a Console or PC? Microsoft’s Windows Gaming Shell
If these rumors prove accurate, Microsoft is reportedly developing a special Windows “shell” similar to Steam’s Big Picture Mode to create a console-like experience. This interface would provide a controller-friendly overlay for Windows that works seamlessly on both the next Xbox and PC.
This approach directly addresses one of the biggest challenges facing Windows gaming on devices like the ASUS ROG Ally—the lack of a streamlined, controller-optimized interface. While SteamOS offers an accessible console-like experience on the Steam Deck, Windows-based handhelds currently require more technical navigation.
The console-style Windows shell could serve as the main interface for the next Xbox while maintaining access to full Windows functionality underneath. According to eXtas1s, “Everything is going to be developed around PC environments. Those logically need Steam integration, and you’ll have that in your Microsoft Store when you turn on your next generation Xbox console.”
This hybrid approach would allow Microsoft to maintain the simplicity of console gaming while offering the flexibility of PC—potentially giving Xbox a unique position in the market compared to PlayStation’s more traditional console approach.
Series X Successor and Beyond
Microsoft’s next-generation Xbox hardware is reportedly targeted for a 2027 release window—an ambitious timeline that might put it ahead of Sony’s PlayStation 6. According to industry sources, Microsoft is skipping the mid-generation refresh that Sony pursued with PS5 Pro to focus on a complete next-gen solution.
The hardware strategy appears two-pronged. First, Microsoft is developing a high-end successor to the Xbox Series X that will likely serve as the flagship console. Second, the company is working on what’s described as a more Nintendo Switch-like handheld device capable of playing Xbox games on the go.
Project Kennan, a collaboration between Microsoft and ASUS, represents an important step toward this vision. This partnership is expected to produce an Xbox-branded portable Windows 11 gaming PC that will, according to Windows Central, “look unmistakably Xbox” and feature “an official Xbox guide button, and Xbox design sensibilities.”
The controller landscape is also changing. Reports indicate new Xbox controllers in development will incorporate DualSense-style features including refined haptic feedback rather than traditional rumble. These controllers are expected to be compatible with both current and next-gen Xbox systems.
Emulation or Bust with Backward Compatibility
One of the most intriguing aspects of these rumors involves Microsoft’s approach to backward compatibility—a feature Xbox has championed throughout the current generation.
Microsoft is reportedly developing an Xbox emulator for Windows that would support the entire Xbox back catalog. This suggests the next Xbox—functioning essentially as a Windows PC with a gamepad-friendly interface—could allow players to carry over their existing Xbox libraries through emulation.
However, this approach raises questions about implementation. If the next Xbox runs a more PC-like Windows OS to enable greater Steam compatibility, could that compromise existing Xbox game compatibility? A document from several years ago suggested Microsoft might have considered sacrificing Xbox backward compatibility to push Windows 11 compatibility—though recent hiring for “forwards compatibility” technology suggests the company remains committed to preserving game libraries.
The technical challenges here shouldn’t be underestimated. Console users expect plug-and-play simplicity without dealing with Windows menus, drivers, or configuration files. Creating a system that maintains this simplicity while offering PC-level flexibility represents a significant engineering challenge.
Game Pass Transformation
Game Pass appears set to remain the cornerstone of Microsoft’s gaming strategy, but changes may be on the horizon. According to leaked information, Microsoft is considering adjusting the pricing structure for its subscription service while introducing new, more affordable options.
These new tiers could include ad-supported versions of Game Pass as well as cloud-only offerings that wouldn’t require local hardware for game installation. This tiered approach would allow Microsoft to target different market segments, from budget-conscious gamers to high-end enthusiasts.
The integration of Steam and other storefronts raises questions about Game Pass positioning. Will subscribers continue to see value in the service when they potentially have access to Steam’s frequent deep discounts? Microsoft likely views Game Pass as complementary to other storefronts rather than competitive, creating an ecosystem where gamers can access titles through multiple channels.
Microsoft’s hiring to improve forwards compatibility technology suggests Game Pass will continue to leverage the ability to play games across generations. This focus on preservation and accessibility aligns with the company’s broader strategy of prioritizing software and services over hardware divisions.
Xbox’s Market Reset
The current generation of Xbox consoles has faced significant challenges in the market. While the Xbox Series X and Series S initially sold well—even outpacing PS5 during some quarters due to stock limitations—demand has reportedly declined substantially in recent years.
Microsoft appears to be actively pivoting away from the traditional console market approach. The company’s “This is an Xbox” marketing campaign signaled a fundamental shift, emphasizing that Xbox is no longer just a console but an ecosystem spanning PCs, mobile devices, and even PlayStation. Xbox consoles have effectively been relegated to the lower end of Microsoft’s overall gaming strategy.
This shift culminated in Microsoft’s decision to release previously exclusive titles like Forza Horizon 5 on PlayStation platforms—a move that would have been unthinkable in previous console generations. As one source article states, “Microsoft doesn’t care where you play their games—just that you’re playing them.”
The year-over-year decline in Xbox hardware sales suggests this approach hasn’t resonated with the traditional console market. However, Microsoft seems committed to the strategy, betting that a more PC-like Xbox with Steam integration could significantly change the value proposition for potential console buyers in the next generation.
PC Perks for Console Players
The addition of Steam and Epic Games Store to the Xbox ecosystem could deliver significant advantages to console players who have traditionally been limited to a single digital storefront.
One of the most compelling benefits would be access to Steam’s legendary sales events. PC gamers routinely enjoy massive discounts during Steam’s Summer and Winter Sales—something console gamers have never experienced at the same scale. This competitive pricing environment could force changes across the industry.
Steam integration might also open the door to something previously unimaginable—PlayStation games on Xbox hardware. With Sony increasingly bringing its exclusive titles to PC via Steam, Xbox owners could potentially play games like God of War or Spider-Man through their Steam accounts on Xbox consoles.
Mod support represents another potential advantage. PC gaming has long benefited from vibrant modding communities that extend and transform games. If the next Xbox truly embraces its PC underpinnings, it could bring this creative ecosystem to the living room in a more accessible way than ever before.
Unanswered Questions and Challenges
Despite the exciting possibilities, Microsoft’s apparent strategy raises significant questions that remain unanswered.
The financial model presents perhaps the biggest challenge. Currently, Microsoft collects a 30% commission on games sold through the Xbox Store. If players begin purchasing games through Steam instead, Microsoft would lose this revenue stream. This raises a critical question: If developers can target Xbox via Steam without Microsoft’s certification process, what incentive remains to create Xbox Store listings?
The certification process itself presents another dilemma. Console certification typically ensures games meet specific quality and compatibility standards. Would games purchased through Steam undergo the same rigorous testing, or would Microsoft need to create new systems to maintain quality control?
User experience concerns also loom large. Console players value simplicity—they expect to turn on their system and start playing without technical complications. Can Microsoft deliver a hybrid PC-console experience that maintains this simplicity while offering PC advantages?
Finally, there’s the question of market positioning. With Xbox exclusive games now appearing on PlayStation, what will drive consumers to purchase Xbox hardware? Microsoft is betting on differentiation rather than exclusivity, but whether features like Steam integration will be enough to compete with PlayStation 6 remains an open question.
Xbox Handheld Ambitions
Microsoft’s handheld gaming strategy appears to be accelerating alongside its next-gen console plans. The company is reportedly targeting a 2025 release for its first Xbox-branded handheld device—potentially establishing a foothold in portable gaming before the full next-gen launch in 2027.
The Windows Central report describes this device as an Xbox-branded portable PC manufactured through a partnership with an unnamed original equipment manufacturer. This approach mirrors Microsoft’s Surface strategy, where the company sets hardware standards while working with partners for production.
Project Kennan, the collaboration between Microsoft and ASUS, likely represents a stepping stone toward this vision. By partnering with ASUS, Microsoft can leverage existing expertise in Windows handheld gaming while adding Xbox-specific features and optimizations.
The Steam integration would particularly benefit a handheld device, giving players access to thousands of verified Steam Deck-compatible games without requiring additional testing or certification. This ready-made library could give an Xbox handheld immediate value beyond just Xbox Game Pass titles.
Microsoft’s handheld would presumably feature the same console-like Windows shell being developed for the next-gen Xbox, creating consistency across the ecosystem. This would address one of the primary criticisms of current Windows handhelds—their complicated user interface compared to Steam Deck’s streamlined SteamOS.
Next Console Gen Console Wars
With Microsoft apparently targeting 2027 for its next major console release, the company seems determined to launch ahead of Sony’s PlayStation 6. This strategy reverses the current generation’s timing, where PS5 established market dominance early.
This extended gap between generations—approximately seven years from Xbox Series X/S launch to its successor—gives Microsoft substantial time to refine its approach. The company is bypassing the mid-generation refresh that Sony pursued with PS5 Pro, focusing resources on a more fundamental reimagining of console gaming.
The competitive landscape by 2027 could look dramatically different from today. Cloud gaming will likely have matured considerably, potentially reducing the importance of local hardware. Mobile gaming continues to grow, with Microsoft actively pursuing this market through acquisitions like Activision Blizzard.
Nintendo’s position by 2027 also remains unknown. The Switch successor will likely be well-established by then, possibly forcing both Microsoft and Sony to reconsider their approaches to the hybrid home/portable console market that Nintendo pioneered.
Microsoft’s strategy suggests the company sees the traditional console war as unwinnable through conventional means. Instead, it appears to be redefining what a “console” means—creating a hybrid device that brings PC gaming’s openness to the living room while maintaining console convenience.
Windows On Xbox Is It Technically Possible?
The technical execution of a Windows-based Xbox raises fascinating possibilities and challenges. Unlike previous Xbox consoles that used custom operating systems based on Windows components, the next Xbox might run a specialized version of full Windows.
Reports suggest Microsoft is developing this custom Windows implementation with a console-first perspective. The “shell” layer would mask the complexity of Windows while maintaining access to its capabilities—similar to how SteamOS provides a streamlined interface while Linux runs underneath.
This approach would solve the “living room PC” problem that has challenged the industry for years. Previous attempts at bringing PC gaming to the living room, like Steam Machines, struggled with interfaces that weren’t optimized for controller use and distance viewing. Microsoft’s dual expertise in both console and PC operating systems gives it a unique advantage in addressing this challenge.
The Windows foundation would also simplify game development across the Xbox ecosystem. Developers could potentially build once for Windows and have their games run on Xbox consoles, handhelds, and PCs with minimal modifications—reducing the barriers that currently segment gaming platforms.
For users, this could mean unprecedented flexibility. Games purchased through Steam, Epic Games Store, or Xbox would all be accessible from the same device—potentially with cross-save functionality that follows players across all their devices.
Evolution or Revolution?
Microsoft’s apparent vision for the next Xbox represents either the natural evolution of console gaming or a revolutionary break from tradition, depending on your perspective. By embracing PC gaming’s openness while maintaining console simplicity, the company is charting an ambitious course for the future.
The integration of Steam and Epic Games Store could reshape the economics of console gaming, introducing competition to what has traditionally been a closed marketplace. This might benefit consumers through lower prices and greater choice, while challenging developers and platform holders to adapt their business models.
The 2027 target date gives Microsoft time to refine this approach and gauge market reaction to initial steps like Project Kennan. The extended timeline also provides an opportunity to address the technical challenges of creating a hybrid device that satisfies both PC and console gamers.
Whether this strategy succeeds ultimately depends on execution. Can Microsoft deliver a system that offers PC gaming’s flexibility without sacrificing console gaming’s simplicity? Can it maintain backward compatibility while moving forward with a more open platform? Will gamers embrace a console that’s fundamentally a PC in disguise?
Microsoft’s willingness to break from console traditions suggests the company sees the future of gaming differently than its competitors. Rather than continuing to fight for dominance in the traditional console space, it appears to be creating a new category that bridges the gap between PC and console gaming—potentially rendering the distinction obsolete.
Key Takeaways
- Microsoft is reportedly testing Steam integration for the Microsoft Store, with plans to extend this to next-gen Xbox consoles
- The next Xbox is expected to launch in 2027 and will function more like a Windows PC than a traditional console
- A console-friendly Windows “shell” similar to Steam’s Big Picture Mode is in development to maintain simplicity
- Microsoft’s hardware strategy includes both a high-end Series X successor and a handheld gaming device
- Project Kennan, a collaboration with ASUS, represents Microsoft’s first step into Xbox-branded handheld gaming
- Xbox emulation technology is being developed to ensure backward compatibility with existing game libraries
- Game Pass will continue but may see pricing changes and new tiers, including ad-supported and cloud-only options
- Current Xbox console sales have reportedly declined, prompting Microsoft’s shift away from traditional console strategy
- Integration with PC storefronts could bring competitive pricing and mod support to the console environment
- The change raises questions about Microsoft’s revenue model, as they would lose their 30% cut on games purchased through Steam
Frequently Asked Questions
When will the next Xbox be released? According to current reports, Microsoft is targeting a 2027 release for its next-generation Xbox hardware.
Will I be able to play my Steam games on Xbox? If the rumors are accurate, the next Xbox will allow users to access the Steam store and play compatible games from their Steam library.
What is Project Kennan? Project Kennan is a collaboration between Microsoft and ASUS to develop an Xbox-branded handheld gaming device running Windows.
Will the next Xbox still play my current Xbox games? Microsoft is reportedly developing emulation technology to ensure backward compatibility, though the full extent of support remains unclear.
How will Game Pass change in the next generation? Game Pass will continue but may offer new tiers, including potential ad-supported and cloud-only options at different price points.
Can I play PlayStation games on the next Xbox? Theoretically, PlayStation games that have been released on Steam could be playable on the next Xbox if Steam integration is implemented.
Will the next Xbox require an internet connection? No information has been released about online requirements, though the PC-like nature suggests some features may require connectivity.
Is Microsoft abandoning traditional console gaming? Rather than abandoning consoles, Microsoft appears to be redefining what a console is by merging PC and console gaming concepts.
Will games on the next Xbox still require certification? This remains unclear, especially for games purchased through Steam or Epic Games Store rather than the Xbox marketplace.
How will this affect game pricing on Xbox? Access to competitive PC storefronts like Steam could potentially lead to more frequent sales and lower prices compared to traditional console ecosystems.