Next-generation gaming just got smaller. Microsoft unveiled a new, cheaper Xbox that the company says will be its smallest one ever.

The Xbox Series S costs US$299, putting it at the same price point as a Nintendo Switch or an Xbox One S, which is an older model.

Because of the high demand for games during the Covid-19 pandemic, some retailers are selling consoles at inflated prices. At $299, the Series S is cheaper than some competitors at their inflated prices.

Microsoft has already announced it plans to release the bigger, more expensive Xbox Series X in November, although it hasn't said what the price will be. That console will have a powerful processor and graphics card for faster loading times and better-looking games.

Microsoft still has a few pieces of the puzzle to reveal as it tries to build hype ahead of the holiday shopping season. The company didn't say when it would release the smaller Series S and didn't offer details on its technical specifications. Fans are also waiting for Microsoft to announce the price of the highly anticipated Series X.

The tech giant makes multiple consoles for the current generation at different price points, so coming out with a Series S isn't a departure from its previous strategy, said Ampere Analysis games research director Piers Harding-Rolls.

It does put Microsoft in a better position to compete against Sony's PlayStation 5, he said. PlayStation 5 is also expected to come out during the upcoming holiday season.

While Harding-Rolls still predicts that Sony will outsell Microsoft in consoles, he forecasts that Xbox gets a slight bump up in sales. He had previously estimated Xbox would sell 37 million next-gen consoles by the end of 2024, but he now thinks with the addition of Series S, that Xbox could sell around 44 million.

That's compared with Sony, which could sell around 67 million in the same time frame, he said.