New Xbox console rumored for release

Microsoft may be releasing a new video games console, codenamed Scorpio, for release in 2017, according to several gaming news websites.

According to reports on the video game websites Kotaku and Polygon, the new console will be an upgraded version of the current product, the Xbox One, with up to four times more power.

The move by Microsoft follows a similar decision by Sony to release an upgraded version of the PlayStation 4 called the NEO.

Microsoft had not responded to requests for comment at the time of writing.

Although the PlayStation 4 and the Xbox One were only released late in 2013, Sony and Microsoft have previously sold improved versions of their consoles during a current product's lifestyle.

This strategy has been used to boost sales and reduce costs by using cheaper or more efficient components, according to Piers Harding-Rolls, director and head of games research at IHS Technology.

Xbox One
Xbox One

However, it is possible that the market may see new versions of consoles released more often.

"This cycle is different though with standardized components used in the latest consoles meaning that upgrades to a wider number of components could be possible relatively easily, which may result in more iterations to keep the platforms fresh," he told CNBC via email.

Sources who spoke to Kotaku claim the Scorpio will be better able to support advanced virtual reality gaming devices, such as the Oculus Rift.

On the other hand, the NEO and the Scorpio may be positioned as premium, better-performing devices in order to appeal to wealthier consumers, although this runs the risk of alienating existing customers.

"A tiered console strategy allows the companies to engage different user groups at different price points," Harding-Rolls said. "The challenge is making sure the user base is not fragmented as a result."

While Microsoft has not released a sales update since November 2014, the PlayStation 4 has outsold the Xbox One. By releasing the Scorpio, Microsoft may be attempting to close the sales gap with Sony and recapture market share.

"Microsoft remains competitive in the U.S. and U.K., but it has lost market share in continental Europe," Harding-Rolls said. "I would like to see Microsoft get more aggressive in promoting its unique strengths - traditionally this centres on its Xbox Live offer - and to drop its price to become more competitive."

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