The idea of a streaming console is pretty straightforward. It would work similarly to a regular console, except you would only be able to play games by streaming them via the internet. That means the console wouldn't need to run games natively on its hardware, so it could be much cheaper, but, as transcribed by VGC, Spencer explained that Xbox couldn't make it as cheap as they wanted to.
"Keystone was more expensive than we wanted it to be," said Spencer, referring to its cost of production. He explained how he thinks that its price should be between $99 and $129, due to the Xbox Series S being $299. "I think in order for a streaming-only box to make sense, the price delta to S has to be pretty significant." However, due to the production costs, Xbox felt unable to safely price it at that amount while including a controller.
A controller was something Spencer felt was necessary, which only makes sense. All consoles come with at least one controller, so if the Keystone lacked it, even if it's only a streaming console, it would stand out. Spencer states that Xbox is still focused on the Keystone, but that it would only come "when [Xbox] can get the right costs." He did say though, that a lot of members of the team took the device home and that "it worked. It worked really, really, well."
He went on to confirm prior reporting that the streaming console was indeed on his shelf when he uploaded a picture for Fallout's 25th anniversary. He explained it was on his shelf because he loved the effort the team put in to make it. "[They] rolled up their sleeves and in nine months they built that thing." Since the console wasn't feasible for the moment, the team shifted their focus to making a Smart TV app with Samsung, to which Spencer states, "we're really happy with the results there."
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Source: https://www.dualshockers.com/xbox-streaming-console-on-hold/
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