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Microsoft Unveils New Virtual-Reality Gaming Console

A Microsoft Corp. Xbox display ahead of the E3 Electronic Entertainment Expo in Los Angeles on Monday.
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A Microsoft Corp. Xbox display ahead of the E3 Electronic Entertainment Expo in Los Angeles on Monday.


Photo:

Patrick T. Fallon/Bloomberg

By

Sarah E. Needleman

Updated June 13, 2016 6:16 p.m. ET


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Microsoft Corp.
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is developing a new videogame console for virtual-reality and 4K resolution gaming, the company said Monday at a media event in Los Angeles ahead of the gaming industry’s annual E3 conference. It also is planning a slimmer version of the Xbox One.

The new console, dubbed “Project Scorpio,” is expected for the 2017 holiday season and “will be the most powerful console ever built,” Phil Spencer, head of Xbox, said on stage at the Galen Center. The beefier machine will provide “true 4K gaming and premier VR experiences,” he said.

The unveiling of the new console comes after Sony Corp.
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on Friday said it is developing a more powerful PlayStation 4. Both moves signal a marked change in gaming in which consoles are no longer released once every six or seven years.

The more frequent cadence of console releases is similar to the regular computer upgrades that PC gamers are used to for keeping up with improvements in performance and graphics. It reflects the increasingly competitive gaming landscape, as gamers gravitate toward mobile devices and take up new virtual and augmented reality technologies.

“The challenge for Microsoft and Sony is providing something commercially meaningful without fragmenting the user base,” said Piers Harding-Rolls, an analyst at research firm IHS.

Investors have poured $1.7 billion in augmented reality, or AR, and virtual reality technology over the past 12 months, according to Digi-Capital, a mergers-and-acquisitions​​ advisory firm. By 2020, it projects AR to generate $90 billion in revenue and VR to reach $30 billion.

Microsoft is developing HoloLens, an AR device that works with PCs. It is unclear which VR headsets will be compatible with Project Scorpio, though Facebook Inc.
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’s Oculus Rift could be a candidate as that device already is sold with an Xbox controller. Sony already has unveiled its PSVR headset, which is scheduled for release in October.

With the current generation of consoles, Microsoft trails Sony by a significant amount. Sony in May said it has sold more than 40 million PlayStation 4 units, outpacing all of its predecessors. Microsoft last said in fall 2014 that it had sold more than 10 million units but hasn’t updated that figure since. Analysts estimate it is now around 20 million.

Nintendo Co.
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in April said it has sold 12.8 million Wii U consoles as of March 31. The company has said it is working on a new gaming platform code-named NX due out in 2017, stopping short of disclosing any details about the machine.

At the Galen Center event, Microsoft said the games and accessories made for the Project Scorpio console will be compatible with the Xbox One and the new, slimmer Xbox One called Xbox One S.

Microsoft didn’t disclose storage capabilities for the new console but said a limited launch edition of the Xbox One S, which is 40% smaller and can sit vertically, will come with up to 2 terabytes of space for $399. A 1 terabyte version will be available for $349, while a $299 Xbox One S provides 500 gigabytes.

The high-storage models could appeal to gamers who prefer to download digital copies of games as opposed to swapping in and out games on discs. All models come in white and feature 4K resolution for enhanced gaming graphics as well as streaming video and Blu-ray discs.

Also on Monday, Microsoft said it would soon make it possible for fans of the “Minecraft: Pocket Edition” to play the hit block-building game with others using different mobile platforms, including iOS, Android, Kindle Fire and the Gear VR. What’s more, the company announced a new initiative aimed at making its Xbox Live online gaming platform more inclusive, and it revealed coming exclusive Xbox One titles including “Scalebound” and “State of Decay 2.”

Corrections Amplifications:
Microsoft said it soon would make it possible for fans of “Minecraft: Pocket Edition” to play the block-building game with others using different mobile platforms, including iOS, Android, Kindle Fire and Gear VR. An earlier version of this article incorrectly said the cross-platform compatibility also would apply to the Xbox One gaming console. (June 13, 2016)

Write to Sarah E. Needleman at sarah.needleman@wsj.com

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