The spiralling cost of new and existing consoles will require "radically different business models" over the coming generation, Xbox boss Asha Sharma has said.
Speaking to Fortune, Sharma acknowledged the increasing price of existing hardware and components — fuelled by global crises and the rise of AI — and said the industry had "reached a point where it will be hard to imagine" mass audiences still being able to afford "thousands of dollars" for a new console generation.
For the first time, the current PlayStation 5 and Xbox Series X/S generation of consoles have seen price increases rather than cost savings over the course of the past five years. Microsoft and Sony have repeatedly raised prices on hardware, accessories and gaming subscriptions. Nintendo has also not been immune, and recently acknowledged it would up the price of Switch 2, just over a year after its arrival.
Hardware manufacturers have struggled over the past half decade with increasing demand for components such as processors, which are being used by power hungry AI data centers. Production and shipping costs have also ballooned due to tariffs and logistical problems prompted by global conflict.
All of which has pushed the current cost of consoles higher — while it's believed the next generation of consoles are still years away, as manufacturers look to land on a suitable leap in power that's still affordable.
Sharma's comments suggest, however, that whatever Xbox does do next, it cannot simply rely on having the most powerful hardware to be successful — a tactic Microsoft has tried, only to still find itself far behind Sony in terms of console sales.
"We will continue to look at new business models, I think is needed for console, rather than just the most premium, high-performance console in the world," Sharma said. "I think we've reached a point where it will be hard to imagine that mass audiences can afford thousands of dollars to spend on a console generation. And so I think we will start to see radically different business models that we never expected start to come into orbit later this year."
It's a comment that feels somewhat ironic, considering Sharma's recent recommitment to building a next generation Xbox console — currently codenamed Project Helix. And especially so after Sharma swiftly axed the unpopular "This is an Xbox" marketing campaign, that told customers their phone or smart TV could also access Xbox games.
Is Sharma suggesting Microsoft will again offer a lower-powered console alternative, such as the current Xbox Series S? Is this a hint that Microsoft is still interested in its handheld plans, which have so far been limited to its partnership with Asus for the ROG Ally X? Or is this about considering alternative purchase models for consumers — leasing hardware, or offering it via a subscription, as Microsoft has done previously?
"We must think about other ways to think about the cost construction of the console," Sharma said. "We must think about how we create different plans, so more people can participate in the console. We must think about partnerships that will allow us to have better distribution and reach, and we must think about the experiences that we're creating outside of that as well to reach new audiences."
Xbox Games Series Tier List
Xbox Games Series Tier List
Despite all these challenges, Sharma said she expects demand to outstrip supply when Project Helix is eventually released.
"There's more demand than there is supply for our Gen-9 console, and I suspect the same will be there with our Gen-10 console," Sharma said. "I'm excited about it. It's a console that's also going to allow you to play your PC games. It's going to have backward compatibility. It's going to have leading-end performance. But there's material work to do to make sure that it is available to the people that want to want to play. And so we're working on that."
While the solution remains vague, the issue certainly feels a pressing one to solve. As consoles edge towards the $1,000 mark, some gaming fans feel there's now little difference in price than simply switching to PC, while others have expressed concern that the next generation of hardware will be the most expensive ever.
Tom Phillips is IGN's News Editor. You can reach Tom at tom_phillips@ign.com or find him on Bluesky @tomphillipseg.bsky.social