Xbox 720 may take over your TV, be joined by Xbox Mini

Xbox Mini could provide backwards compatibility

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A rumored new Xbox feature that would allow Microsoft's next-generation console to take over a TV signal could position it to be the ultimate set-top box for gamers.

It's described as a passthrough device between a cable or satellite box and a television, which is along the lines of current Google TV set-top boxes, multiple sources told The Verge.

The Xbox 720, like the Sony NSZ-GS7 or Netgear NeoTV Prime, would feature two HDMI ports and overlay a new user interface on top of TV channels.

This may be the source of the always-online Xbox 720 rumors, as these specific entertainment services may require a constant internet connection.

The Xbox 720 advantage

Microsoft's new Xbox would have an advantage over Google TV devices, as it can play next-generation video games with a real controller.

The company may also have a leg up when it comes to making deals with content providers simply because it's not Google, which has been spurned by major TV networks in the past.

Finally, Microsoft has 12 years of experience in the DVR overlay field, having launched Windows Media Center during its Windows XP days, and maturing it into an add-on for Windows 8.

Although some cable services would be rolled out gradually, according to The Verge, the basic set-top box functionality will be ready for the Xbox 720 launch.

Xbox Mini rumor

The same report alludes to a low-cost Xbox TV set-top box, which echos an Xbox Mini rumor that popped up today from another source, VG Leaks.

Described as a standalone product with Xbox 360 functionality, the Xbox Mini is said to be Microsoft's way of competing with budget-friendly living room devices like Apple TV.

It doesn't have a disc drive, according to the rumor, but it would be able to play games bought via Games On Demand on Xbox Live. The same goes for downloaded music and movies.

All of this information lines up with the budget-priced Xbox 360 - codenamed "Stingray" - that's said to be on its way.

Xbox Mini price and release date

Although Xbox Mini is not necessarily an add-on, it's said to be able to connect with an Xbox 720 to provide backwards compatibility.

"It's no more different than what Sony will be doing with Gaikai for playing PS3 games on PS4," according to the report. "Only with Xbox it will be done locally and not through the cloud."

This two-box solution is reminiscent of the ill-fated Xbox 360 HD DVD add-on, but Microsoft is probably hoping that this new device catches on right away and doesn't get bogged down in a format war.

Both VG Leaks and The Verge report that this low-cost Xbox machine will debut next year as opposed to releasing along the Xbox 720 console, which is expected to be released this fall.

The Xbox Mini price is suggested to be USD $149 (£97, AUD$141) or lower, putting it in direct competition with the USD $99 (£65, AUD$94) Apple TV.

With an Xbox 720 launch event rumored for May, Microsoft is likely to do two things next month: put some of these rumors to rest, and actually show everyone what its console looks like.