Microsoft just revealed a newer, cheaper Xbox One that completely ditches the disc drive

With no disc drive, people who buy the Xbox One S All-Digital edition will need to rely on the Microsoft's digital marketplace for Xbox One software. New Xbox games typically release physical and digital copies on the same day, with few exceptions.

However, the prospect of an exclusively digital library means All-Digital Xbox One owners will depend on cloud-hosted copies of their games that could potentially disappear some day, instead of physical discs that they can share with other people and use without an internet connection.

Microsoft has worked to build a simple, effective ecosystem for digital Xbox content and the decision to forgo discs with the newest Xbox shows their faith in the online platform. Even as the All-Digital Xbox One loses the ability to play Blu-ray and DVD movies, Xbox owners will still have access to 4K HDR TV and movies from Netflix, Hulu, and a host of other streaming video and digital content providers.

To make the All-Digital Xbox One an even better deal, Xbox will also begin offering its two subscription services, Xbox Live Gold and Xbox Game Pass, at a discount when players sign up for both. Game Pass gives players access to more than 100 Xbox games they can download on demand, while Xbox Live Gold is necessary for multiplayer online games, and gives free games to subscribers each month. Live Gold and Game Pass typically cost $9.99 per month each, but a new plan, Xbox Game Pass Ultimate, will combine the services for $14.99 per month.

Microsoft is still working on the next generation of Xbox hardware, which is expected include its streaming video game service, Project xCloud. Like Google's recently announced Stadia, Project xCloud will be able to stream Xbox games to smartphones and other non-Xbox devices. Trials for Project xCloud are expected to begin this summer, and rumors suggest Microsoft may tease its next generation hardware at this year's Electronic Entertainment Expo.