The $15 billion video game industry is once again up for grabs as the next generation of consoles begin marching out to consumers. Nintendo already launched its Wii U, Sony recently debuted the PlayStation 4, and Microsoft … well, things are quiet at Microsoft.

The multifaceted corporation is probably keeping things hush-hush so it can wow fans with the inevitable reveal of the next Xbox, codenamed Durango. At the same time, the Xbox 360 continues to sell well (302,000 in February), and Microsoft doesn’t want to cannibalize that major source of revenue until it has to.

The company refuses to utter a word on the subject, which only makes every peep from any potential source that much louder.

“We don’t comment on rumors and speculation,” a Microsoft spokesperson told GamesBeat when we asked for comment about its next system.

Microsoft has a lot on the line. Gaming consoles are a massive tech battleground, and the Xbox 360 is currently on the king of that particular hill. The 360 has outsold the PlayStation 3 and Wii every month for the last two years, according to the NPD retail tracking firm.

Despite the silence, rumors about the Durango continue to seep out of the company’s tight grip.

We don’t know anything for sure, but a few things seem certain:

  • The Durango is likely using a powerful CPU and GPU from Silicon Valley chip-vendor AMD to power its games.
  • Microsoft will hold an event before or at the annual Electronic Entertainment Expo in June to reveal the console.
  • A new version of Kinect is likely in the works.

Then we have a whole mess of often contradictory rumors that no one can confirm:

  • Durango requires an online connection for games. (Kotaku)
  • It can detect and block used games. (Kotaku)
  • It requires Kinect 2.0, a more-capable version of Microsoft’s original motion-control camera. (Kotaku)
  • It will work as a TV set-top box to replace your cable box. (The Verge)
  • Only Kinect’s new voice features require an online connection. (VGLeaks)
  • Games don’t require an online connection. (VGLeaks)
  • Durango won’t block used games. (VGLeaks)
  • Backward compatibility is only possible through the use of an add-on called Xbox Mini. (VGLeaks)
  • Players have to install every game. That includes disc-based games. (Kotaku)
  • Durango has a new controller. Xbox 360’s pad won’t work. (Kotaku)
  • A new Forza racing game and Kinect fantasy game Ryse (from German developer Crytek) will launch with the Durango. (The Verge)

Does it require an Internet connection or not?

The most controversial rumor is that the Durango requires an online connection to start games. That possibility previously swirled around the PlayStation 4. Sony alleviated fan concerns by confirming that the PS4 doesn’t require a connection for games nor will it block used games.

But Microsoft isn’t commenting on this. That means it can’t even come out and clarify exactly what it’s position is on the volatile subject.

“Always-on connectivity required to play console games probably doesn’t make a lot of sense,” Baird analyst Colin Sebastian told GamesBeat. “There is a sizable base of gamers that still don’t have stable broadband access in smaller cities in Europe or rural North America.”

Nearly 30 percent of Xbox 360 owners in the U.S. had never connected their consoles to the Internet in early 2012, according to a study by data firm IDC Research.

“Even if that’s down to 25 percent today, the idea that they would launch a new platform that immediately shut out a quarter of their addressable market seems crazy to me,” IDC researcher Lewis Ward told GamesBeat. “The idea that Microsoft would be able to iron out all the bugs [inherent to always-online] even for those gamers with a sturdy web connection is also quite unlikely.”

So, where are these rumors coming from?

Ward speculates that the dev systems, which seem to be the basis for the original Kotaku rumors, require online as a security measure. Microsoft wants to trace each kit so it knows who is doing what in case things start to leak.

It’s also possible that sources are misinterpreting certain features. For example, a prominent rumor is that Durango will connect with cable boxes to provide a Google TV-style overlay. This functionality is also known as TV-over-IP, or IPTV.

“The Xbox will obviously have to be connected while users are watching IPTV, but that wouldn’t be a requirement when not watching,” Wedbush analyst Michael Pachter told GamesBeat.

But Pachter has a different theory about the source of the always-on rumblings.

“The always-connected requirement has nothing to do with TV and everything to do with games,” he said. “If it’s true, the box would be always-on, so Kinect can respond to voice commands and so games start immediately.”

But Pachter also doubts Microsoft would implement a connection requirement to start local games.

VGLeaks, a website with a decent track record on predicting these things, also pointed to the Kinect as the source of this hearsay.

It’s possible that Kinect 2.0 will work like Apple’s Siri. That voice-command service records a user’s voice, decodes it on a server, and then supplies an answer from said server. Google Now works the same way. Similarly, a next-gen Kinect may require access to a server to reach its potential if the VGLeaks source is accurate.

What the hell is an Xbox Mini?

More whispering out of VGLeaks claims Xbox Mini is an Apple TV-like system based on the Xbox 360 but without a disc drive. It will reportedly retail at $150.

“I don’t think we’re to the point, as an ecosystem, where a discless console experience could be a top seller,” said Ward. “They could do it, and maybe they have some cloud-streaming stuff that would make it compelling as a gaming-second device. If it does all the video stuff and general purpose applications first — I guess that’s conceptually possible.”

The second part of the Xbox Mini rumor, however, doesn’t seem conceptually possible.

VGLeaks’s source claims that the Durango will only have backward compatibility when gamers plug Xbox Mini into the next-gen Xbox. The report specifically cites the HD-DVD add-on for the 360 as an example. That odd device was a small box that plugged into the 360’s USB port to enable the playback of HD-DVDs (a now-defunct competitor to Blu-ray discs).

What’s odd about that suggestion is that the Xbox Mini doesn’t have a disc drive. That means, according to this source, that to play an Xbox 360 game on a Durango, the disc goes into the next-gen Xbox but will only work if the Mini is also plugged in.

“That sounds crazy to me,” said Ward. “So you’re going to buy a $300 to $500 next-gen console and then you’re going to get some little add-on that [enables Xbox 360 games]?”

The rest of the rumors

The specs, the controller, and the launch games are all still up in the air. We know that stuff can change up until launch, let alone before a company first reveals its console.

We’ll keep digging for new details, but with the amount of misinformation clogging up the reporting, it’s likely we won’t have any idea what is 100 percent true until Microsoft finally decides to show off its new console.

That reveal itself is the subject of rumors. Our sources originally predicted Microsoft would hold an event this month. Now, that’s out in favor of something in May.

E3 begins on June 11. If Microsoft hasn’t announced the console before that date, expect them to reveal it at their pre-E3 press conference.