Well, we’re almost there. In less than 24 hours, the tech world will be listening and watching in anticipation as Microsoft officially unveils the next generation of the Xbox.

The console market has been struggling, but Microsoft — which has led in the U.S. in console sales for 28 consecutive months — is aiming to shake things up with its third-generation console, the first completely new Xbox since the 2005 release of the Xbox 360. The unveiling on Tuesday morning will be followed by a press conference in early June at the E3 game convention, expected to focus more specifically on video games.

“As you can imagine, the team here has been hard at work for many, many years on what we’re going to show over the next few weeks,” said Aaron Greenberg, Microsoft’s Xbox chief of staff, on the Major Nelson podcast last week. “To be honest we have so much goodness that there’s no way we could have packed it all into one event.”

Microsoft’s primary competitor in the game console business, Sony, unveiled its PlayStation 4 back in February but didn’t provide many details or actually show its new console. Microsoft has had some time now to digest Sony’s move, and the two unveilings will be closely compared.

[RELATEDSony teases PS4 hardware in new video, one day before Xbox launch]

GeekWire will be in Redmond on Tuesday covering the unveiling from a gigantic tent on the Microsoft campus. As a preview, let’s get you up-to-speed on some of the most plausible rumors and possibilities for the yet-to-be-named Microsoft console.

xboxmatte1. The new Xbox will be available at two price points: $499 and $299. 

While there have been no confirmed prices, Paul Thurrott, a longtime Microsoft beat reporter who has had an inside line on Microsoft’s Xbox plans, reported that there will be two pricing tiers for the Xbox: $499 and $299. The $299 price, he said, will require a two-year Xbox Live Gold membership at $10/month. Others believe that Microsoft could package a one-year Gold membership into the $499 tier.

[Update: See Paul Thurrott’s comment below noting that the plan for the subsidized version has been canceled. We’ve also corrected the spelling of Thurrott’s name.]

Michael Pachter, a video game analyst with Wedbush Securities, tells us via email that he’s betting prices won’t be announced until later this year. “In order for Microsoft to win, they need games and competitive pricing,” Pachter says. “I’m not sure what we’ll see Tuesday, but guessing we see games and not pricing.”

[RELATEDThe next Xbox: Why this launch is so critical for Microsoft]

2. The new Xbox won’t require an “always-on” Internet connection, but… 

It’s going to be tough to enjoy most features of the new Xbox without connectivity. There had been reports that the next-gen Xbox was going to require an Internet connection even in situations when it wouldn’t normally make sense to have one.

But a report by Ars Technica’s Peter Bright cited an internal memo to Xbox employees saying that the next version of the console won’t require a persistent connection, after all.

Still, not having Internet will keep you from really getting the most out of the new Xbox. In fact, some have reported that it will be up to the game publishers to dictate the “always-on” requirement.

“If you don’t run cable or have Wi-Fi, it’s going to be a problem for you with the next Xbox,” Patcher said in this video.

Expect to see an upgraded Kinect at Tuesday's launch.
Expect to see an upgraded Kinect at Tuesday’s launch.

3. Hardware will be upgraded.

To support a smooth online experience, you can expect the next-gen Xbox to have a lots of memory, a bigger hard drive and a fast processor.

Sanfilippo said he expects a current generation multi-core processor and a Blu-ray drive, but for storage and not video playback “since the licensing is costly.” 

He added that we could see an improved controller that may include touch-input support.

“The current generation Xbox controller is excellent and it should be evolved, not redesigned,” he said. 

4. The Kinect will be upgraded. 

This is almost a certainty, but exactly how much and in what way is still up in the air. Pachter, among others, thinks that the motion-sensing controller will come in every box because he predicts “integrated Skype functionality.” (Microsoft acquired Skype for $8.5 billion in 2011). Skype could also be upgraded to improve in-game video chatting.

Sanfilippo expects the new Kinect hardware to have better processing and resolution capabilities. The new Xbox will also reportedly be able to use the Kinect to detect how many players are in the room for multiplayer suggestions, as well as eye movement.

5. The next Xbox will be focused on taking over our living rooms as a media hub. 

Both Pachter and Sanfilippo believe there will be a way to watch live television with your Xbox, removing the need for another set-top box. This means you could potentially watch TV in a room that has no cable connection, as long as you have an Xbox and Internet.

Will SmartGlass technology be improved for the new Xbox?

“I think it will have a lot of multimedia functionality, such as a built-in ability to access regular TV programming over the Internet, and Microsoft will have a partner that will subsidize the box,” Pachter told us.

That’s taking a huge step beyond what is currently offered with the 360, which currently lets you stream media from companies like Netflix, Hulu and ESPN. But the new console could very well become the new home for all forms of entertainment, especially if Microsoft adds on features likes DVR and support for antenna input to the new Xbox.

“Those would strongly improve the possibility of Xbox being the central (and only) device necessary to drive family room entertainment,” Sanfilippo said of DVR and antenna input.

Sanfillippo also added that streaming entertainment via the new Xbox could also be a way for Microsoft to leverage its other products and services like the Surface tablet, Windows 8, Windows RT and Windows Phone through the “SmartGlass” second-screen experience and a common user interface style, in addition to better compatibility of apps across all of those platforms.

To recap: While we’ll learn at least a few things this week, Microsoft will undoubtedly save some more information for next month’s big E3 video game conference. Looking even past that into 2014, there are lots of other features that could be introduced. For example, will Microsoft incorporate IllumiRoom technology into the new Xbox? Will we be wearing specialized glasses while playing Halo? And will Microsoft at some point offer Internet TV through the Xbox?

Tune in tomorrow for all of the official details from Redmond.

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  • davidgeller

    I don’t think Sony is their primary competitor anymore. Instead, it’s the hundreds of millions of smart phones we’re all using and carrying with us all the time. I’m anxious to see what they introduce. I’m expect some big integration with Skype.

    • Todd Bishop

      Good point, David. Definitely true, defined broadly. Smartphones, tablets, etc. are all taking up a huge chunk of gaming time. Google and Apple and seemingly everyone are also competitors in streaming devices. But in the specific area of game consoles that sit under or on top of the TV, it’s still primarily Sony (and to a lesser extent Nintendo.)

      I’ll be out there covering the Xbox event tomorrow, and I’m looking forward to it, too. Should be interesting, one way or another.

    • Jason Farris

      Smartphones and tablets will consume the low end of gaming for the near future, but can not deliver AAA gaming experiences. While I see the bottom end fracturing and consoles suffering to a small degree in the near term, the market will actually be stronger in the long term as these new gamers taste’s evolve beyond what can be done with a couple fingers and a touch screen. Remember 1985 and the decades of gaming evolution that followed those very simple gaming ideas. The smartphone is today’s quarter in the pizza parlors Defender.

    • Michael Hazell

      Wait until the PS4 comes out. It’s going to be a direct competitor.

  • Guest

    Thank you, Taylor! I’m glad to see all the details of the launch a day early. How much have you played with Xbox Next Generation, and what do you like and dislike so far?

  • Paul Thurrott

    The subsidized console version was canceled, by the way. Just heard this morning.

    Oh, and my name is spelled Thurrott.

    • Jason Farris

      Bummer. I thought that was an interesting model. I still think they should have launched Surface at $299.00 with a Surface Live subscription.

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