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by Dave Thier via Forbes

As far as announcements go, it barely qualified. Microsoft’s head of Xbox Phil Spencer was giving his standard end of E3 press conference talk about the state of gaming and the passion of the Xbox teams. The hardware team, he mentioned, was hard at work on the next Xbox. This is something we all assume, of course, just like we assume that their counterparts at Sony are doing the same thing on the PlayStation 5. And yet it’s still uncommon to make any mention of the next generation outside of a tightly choreographed reveal much closer to launch, mostly because it makes people look forward when you want them buying your hardware now. For Spencer, it made sense to mention it now. Just you wait, he seemed to be saying.

You could see the next Xbox make its appearances elsewhere, as well. Those who don’t work in video games probably didn’t pay much attention to the tech giant’s studio acquisitions, but those in the industry saw them as big moves by a company that’s far from given up on exclusive games. No, those announcements didn’t come with shiny trailers or 2019 release dates, but they were the company’s way of signaling that it doesn’t want to be caught in this exclusive drought ever again.

And when a Microsoft engineer told us about how the company was using machine learning to improve Game Pass performance it felt like a strange, technical detail to include as an announcement on an E3 stage. But the message there felt the same: that Xbox is working on developing backend technologies designed to make games load and play quicker, the sort of thing that likely has lots of applications beyond Game Pass. Again, the spotlight seemed to be shining on a not-so-distant future.

At a certain point, Spencer and co. must have realized that there was no “winning” this console generation, certainly not in terms of sales. Xbox One got off on the wrong foot and never recovered, PlayStation 4 rocketed out of the gate and only accelerated from there. You didn’t need Microsft’s internal analytics to see that. And so Spencer smartly pivoted to building out services like backwards compatibility, cross-play, cross-buy and Game Pass, things that were unlikely to shift the tide in the current generation but could set up the next machine for genuine differentiation from the competition while repairing the company’s tattered reputation with gamers.

The next console generation may well be the last, as Ubisoft’s Yves Guillemot predicted the other day: Spencer made another mention of the sort of streaming services that we’ve been talking about for years but could still render local game computing irrelevant at some point in the distant future. For right now, however, it’s clear that Microsoft is biding its time and gathering its resources to avoid losing the next generation the way it lost this one.

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