This is something I have been mulling over for the past few weeks and it’s something that might add credibility to rumours of a new Xbox within the next 2 years. This conclusion is formed of some of the facts we know about Windows 8 and the Xbox 360 and also quite a lot of rumour and speculation.

First up what we already know about Windows 8 and the Xbox 360.

Microsoft has confirmed that Xbox Live will be integrated into Windows 8. Now currently it’s not entirely clear what this means; we do know that gamers will be able to play against other people across different platforms (Xbox 360 and Windows Phones), earn achievements, etc. However, there is still quite a bit unknown about this new feature of Windows; for example, it could mean that a user could buy and download a game on the Xbox 360 and then play it on a Windows 8, resuming where they left off from the console via the new Cloud Save feature. Even better it could offer of all the entertainment services that are coming to the Xbox over the next few months, effectively turning a Windows 8 PC into an Xbox 360. This must be a fascinating concept to people working on online video game design classes.

If this is the case then it might be possible that any media app on a Windows 8 PC could surface it’s content in the Xbox Live app/hub (whatever it will be called) and be the main place people are going to go to get entertainment on their PC. Windows 8 is likely to have many more media apps than the Xbox 360 ever will so if Windows 8 is able to replicate the entire Xbox 360 experience and have more apps who would buy an Xbox 360?

However, that might not be the entire picture as rumours have suggested that Microsoft is very close to offering a single ecosystem where developers can write an app once and have it run on the PC, Xbox or Windows Phone with hardly any changes to their code. We know that the new Xbox media apps are being built on a special version of Silverlight, we know that Windows Phone apps are built using Silverlight and we also know that Windows 8’s new runtime environment, WinRT, will offer many parallels to Silverlight. We have already seen Microsoft shown how easy it is to convert a Windows Phone app written in Silverlight to a Windows 8 app. Therefore, it might be possible that any media app written for the Xbox 360 or indeed Windows 8 will be able to run on the other platform too. That would bring the Xbox experience on the two platforms to the same level, then it would just be a case of whether or not people wanted to have all the extra features a Windows 8 PC will offer instead of the more constrained Xbox 360.

Of course there is another issue too, as Windows currently does not support playing of Xbox 360 games from physical discs, although there has been rumour and speculation that Windows 8 might just offer that functionality. This would mean that even users who had a collection of games on disc could just as easily use a Windows 8 PC as their Xbox as actually owning an Xbox 360.

Microsoft is also bringing Kinect to the PC in a big way next year with new hardware especially for PCs, therefore when Windows 8 arrives its likely that people be able to interact with their PC just as easily as they can with Xbox 360 using a Kinect.

As far as I can tell Windows 8 is going to offer an extremely similar Xbox experience to the current Xbox 360 with users able to play games against friends, access a vast collection of media, control the system via Kinect and possible even play older Xbox 360 games using a disc. That to me makes me think that Windows 8 will cannibalise sales of the Xbox 360.

That would seem a very odd strategy for Microsoft to pursue, unless of course they have a few tricks up their sleeve.

There are two rumours for Microsoft could be working on for the next version of the Xbox; a small device that receives all its content via the cloud and has no disc drive, the other device is a “future proof” device that is extremely powerful. I don’t see why both of these devices couldn’t go on sale and I can see how these would combat Windows 8’s potential cannibalisation.

A small, streaming only Xbox would under cut the price of most PCs whilst still offering a great entertainment experience. It could also be Microsoft’s response to OnLive which allows user to play games via an internet connection where their servers are used to play and render the games. This allows the hardware the user owns to be relative lightweight and cheap as all the hard work is done by the servers. If there is one thing Microsoft is not short of its servers, what better use for Windows Azure would there be than powering games? This little console would obviously also make use of Kinect.

Equally I think a very powerful Xbox could also be in the works, something that will offer amazing, “next gen” graphics, probably in 3D, that could only be matched by the very top end of the PC market. The price of this would be competitive with most PCs, only a few hundred pounds.

I also wonder is Kinect 2 will be debuting with the new Xboxes and might remain exclusive to the Xboxes for a few years.

The current rumours for Microsoft to announce or unveil its next generation of Xbox state that the company could do it as early as CES 2012, that’s less than a month away. But it’s more likely that Microsoft will announce it at E3 2012. That suggest that the new Xbox is only 1 to 2 years away which fits in very nicely with when Windows 8 is expected to arrive too. If Windows 8 is released towards the end of next year then it would be on sale along side the Xbox 360 which is probably alright to start with as there might not be a huge selection of different types of Windows 8 PCs. However a year later I would expect companies to be offering PCs that are designed to plug into a TV which would be a direct competitor to the Xbox 360. It would be the right time for a new kind of Xbox to be available for consumers.

What are your thoughts on whether Windows 8 will cannibalise the Xbox 360?