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.

Microsoft's Xbox set-top box work is said to be part of a broader effort to ensure its core architecture for the next-generation Xbox is scalable enough to be put together to run on a number of devices. We understand that the company could opt to combine its core system for the next Xbox with a phone stack to deliver a phone capable of running a full version of Microsoft's Xbox Live services. It has also investigated providing this functionality to TV OEMs, who could include the core services as part of a licensed Xbox television set.