"Multiple sources familiar with [Microsoft's] plans have confirmed to The Verge that the company plans to introduce a low-cost alternative to its Xbox console, designed to provide access to core entertainment services. The move will allow Microsoft to further increase its presence in the living room, providing consumers with a choice between a set-top box or a full next-generation Xbox console."
The story continues, "We’re told that the set-top box is part of a two-SKU strategy for Microsoft’s next-generation of Xbox hardware that will be unveiled in 2013, with a release date ahead of the holiday shopping season. The device will run on the core components of Windows 8 and support casual gaming titles rather than full Xbox games typically found on a dedicated console. Although hardware specifications aren’t fully locked down, we understand Microsoft will use a chipset to enable an "always on" device that boots quickly and resumes to provide near-instant access to TV and entertainment services."
When asked for comment, Microsoft told The Verge, "Xbox 360 has found new ways to extend the console lifecycle by introducing controller-free experiences with Kinect and re-inventing the console with a new dashboard and new entertainment content partnerships. We are always thinking about what is next for our platform and how to continue to defy the lifecycle convention."