Xbox shelved Keystone streaming console because it was too expensive to produce

Phil Spencer says device would ideally launch with a controller at $99 to $129 to be viable

News by James Batchelor Editor-in-chief

Published on Nov. 16, 2022

Xbox boss Phil Spencer has shed more light on why Microsoft has, for now, abandoned its plans to release a streaming-only version of its games console.

Back in May, Microsoft confirmed it had shelved the project – known as 'Keystone' – although there was further speculation about work on the device after the prototype was spotted on Spencer's shelf during an Xbox broadcast.

This week, Spencer was interviewed on The Verge's Decoder podcast, with VGC reporting that he attributed the decision to pause work on Keystone due to costs.

“The console we built that now people have seen, Keystone, was more expensive than we wanted it to be when we actually built it out with the hardware that we had inside, and we decided to focus that team’s efforts on delivering the smart TV streaming app,” he told Decoder.

Earlier this year, Microsoft announced a partnership with Samsung to bring an Xbox Cloud Gaming app to the latter's latest smart TVs. On the podcast, Spencer said the company is "really happy with the results there" so far.

At Gamescom, we spoke to Xbox's principal product manager Harrison Hoffman who said that streaming through TVs is the key to taking cloud gaming mainstream.

Regarding Keystone, Spencer added that Xbox is "still focused" on the project, but that pricing it appropriately compared to the other Xbox models has proven to be difficult. The digital-only Xbox Series S retails at $299, or less during price promotions, while the Series X is priced much higher. To make Keystone appealing, the price tag would need to be significantly lower than that of the Series S.

However, Xbox would want to include a controller, which adds additional challenges when it comes to cutting costs.

“I don’t want to announce pricing specifically, but I think you’ve got to be $129, $99, like somewhere in there for [Keystone] to make sense in my view, that we just weren’t there," he said. "We weren’t there with the controller. And I love the effort. The reason it’s on my shelf is the team rolled up their sleeves and in nine months they built that thing. And a bunch of us took it home and it worked. It worked really, really well."

Price will also be a concern due to the macroeconomic climate and the challenges that is creating for businesses.

In August, Sony raised the price of the PlayStation 5 in key markets due to economic pressures and inflation. A month later, Spencer said there were "no plans" to raise the price of Xbox's consoles.