Mixed Reality is Microsoft's biggest 2017 launch

2017 is shaping up to be perhaps the most important year ever for Microsoft's ambitions as a consumer technology company.

The firm, which in recent years has struggled to balance its commitment to business solutions and cloud services against the often conflicting demands of being a consumer tech firm, is set to launch two major product lines this year - an update to the Xbox One console that is, in essence, an entirely new home console device, and a range of "Mixed Reality" headsets, controllers and certified PCs, which are being manufactured to Microsoft's specs by some of the industry's leading hardware firms.

Both of these are big launches, and each of them deserving of attention. On the surface, you might expect that Xbox One X - the new console - would be a far more mainstream prospect than a range of VR headsets, especially given how niche VR remains in spite of the buzz that's been built up around it. Yet all of the signs point to Mixed Reality being Microsoft's really big launch for 2017, and the one that may have the most impact on the company - and the whole technology industry - down the line, while Xbox One X is being positioned both by commentators and by the company itself as something of a niche device for a specific and limited audience.

"PSVR will continue to have a market, but anyone picking winners in the VR space right now is likely favouring Microsoft's play in the long run"

In a sense, the direction being taken with these two devices is entirely different. Xbox One X takes an established platform (albeit one running a distant second behind Sony's dominant PS4) and essentially creates a high-end "premium" version, with price tag to match. It doesn't so much represent a turning point in Xbox strategy (there's no surge in first-party software or major service launch to accompany it) as an appeal to the slim but high-value slice of the market for whom constant talk of 4K HDR screens and Dolby Atmos sound systems says "this is the best you can get," as distinct from "this isn't for the likes of you."

On the other hand, Mixed Reality is all about the democratisation of a technology that's often seemed inaccessible to average consumers. Its hardware specification calls for headsets with inside-out tracking (so no external cameras or sensors) which mount cameras on the front of the headset to track motion controllers - again, removing external sensors from the setup - while its business model aims to create a range of low-cost headsets by leveraging competition between manufacturers like Dell and Asus. The PC specs being certified for use with the headsets also promise relatively low cost of entry to consumers interested in VR.

In essence, Mixed Reality (which is a bit of a misnomer, as these first-generation headsets are not the bridging of VR and AR promised by the "Hololens" concept; they are VR headsets, pure and simple) is an extremely well-designed and technologically impressive mixture of the best parts of many VR approaches we've seen so far. It's about as affordable as Sony's PSVR and just as easy to set up (in fact, slightly more so, since PSVR still requires a single camera); yet it offers a technological fidelity that's surprisingly close to that of Oculus and HTC's pioneering headsets.

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Working with firms like Dell ensures ubiquity, while Microsoft's control of the Windows ecosystem ensures compatibility and ease of use, and the firm's highly open approach with the standards it's promoting - including supporting content from Steam from day one - is an enormous bonus. As the only console VR platform out there, and with Sony's content support behind it, PSVR will continue to have a market, but anyone picking winners in the VR space right now is likely favouring Microsoft's play in the long run, especially given its potential for non-gaming applications (which may yet turn out to be VR's "killer app"). It's notable that Sony's small PSVR price-drop came this week just as Mixed Reality gear was being lauded at IFA in Berlin, though also notable that the company's promised restocking of PSVR hardware into retail channels has still not come to pass.

The elephant in the room here needs addressing; why, given two hardware launches that seem so complementary, isn't Xbox One X supporting Mixed Reality headsets out the gate? The door seemingly remains open to that possibility down the line, but thus far Microsoft's two big consumer tech efforts of 2017 remain frustratingly separate. On paper, you'd imagine that launching the most powerful console ever with the ability to drive high-quality VR experiences through a range of new headsets would be a far more exciting prospect than simply updating the Xbox One to take advantage of some very, very expensive televisions; even if VR is more niche than console gaming right now, the prospects for growth in VR are huge and the chance for a firm like Microsoft to establish and own the standards that define an entire sector for years to come is surely too important to pass up.

"The separation of headsets from console creates an odd tension in Microsoft's line-up; Xbox One X may even find itself competing for Christmas dollars from the same set of consumers who are considering a Mixed Reality setup"

Microsoft's own position seems to express that sentiment; while Xbox One X is rolling out with very few major software releases to support it (essentially copying the low-key rollout of PS4 Pro), the upcoming slate of software supporting Mixed Reality is being talked up significantly and includes a Halo title from 343 Industries. For an Xbox console to launch without a Halo title in support, or even officially on the slate (though one will inevitably be forthcoming), while a different Microsoft product has a Halo title being talked up, is actually rather eye-opening.

The reason for Xbox One X not supporting Mixed Reality at the outset may be quite prosaic; Microsoft's strategy for its headsets involves cooperation with hardware manufacturers who want to use Mixed Reality as a way to sell PCs. Those partners might be far cooler on being involved with this initiative if they felt that their PCs were going to have to compete with a partially-subsidised console being sold by Microsoft itself, and the exclusion of Xbox from the Mixed Reality ecosystem may (this is all speculation) have been a condition of the likes of Asus throwing full-throated support behind the new headsets.

If so, it may be a timed exclusion, with headset support coming to Xbox One X down the line; or it may be that this helps to explain why so much of Microsoft's software approach for Xbox One appears to have shifted to being about well-optimised One and One X versions of Windows 10 software rather than console exclusives. This would potentially allow people with high-end home theatre setups to enjoy the best possible version on Xbox One X, while VR fans can enjoy the same software as optimised for Mixed Reality, and those with Xbox Ones or gaming PCs would enjoy their own tailored version. That fits well with Microsoft's vision both for a contiguous ecosystem and for how cross-platform development should work, the inability to plug a headset into an Xbox being only a small wrinkle in this cloth.

While in the long run not a big deal, in terms of this year alone, the separation of headsets from console creates an odd tension in Microsoft's line-up; Xbox One X may even find itself competing for Christmas dollars from the same set of consumers who are considering a Mixed Reality setup. With Switch also riding high in customer's mindshare and PS4 continuing to steamroller ahead of the competition - not to mention major consumer electronics launches outside the gaming space, like Apple's iPhone Pro or whatever they're going to call it - this winter is going to be one of the most competitive ever in consumer technology, and Microsoft is entering the game with a hell of a strong hand.