Didn’t Microsoft say the next Xbox needed to be affordable?
Didn’t Microsoft say the next Xbox needed to be affordable?
Fortune dropped a bombshell report on the future of gaming this week. According to the publication’s Microsoft insiders, the next Xbox is projected to cost between $1,200 and $1,800 when it arrives in 2028.
My first reaction: The next Xbox is dead on arrival. It’s DOA.
My second thought: Microsoft knows people won’t pay that much. It couldn’t possibly charge that much money if it wants next gen to be a success. “I wouldn’t release it at all,” former Microsoft exec Mike Ybarra recently said.
My third thought: Didn’t Microsoft already say out loud that it knows people won’t pay that much?
I don’t think Fortune’s insiders are the problem here. With today’s incredibly overpriced RAM and storage, it wouldn’t be surprising if it cost over a thousand dollars to build, package, distribute, and sell “the largest technical leap you will have ever seen in a hardware generation,” as former Xbox president Sarah Bond called the next Xbox back in 2024.
But there are at least five ways the report could be correct without making you pay all that money at once. I just don’t think you’re going to like most of them.
The least-likely possibility is the one Fortune suggests itself. Let’s look at the original quote, bolding mine:
[…] the price of the Helix console has internally been projected to cost consumers between $1,200 and $1,800, unless Microsoft decides to subsidize the cost.
Historically, Microsoft has subsidized the Xbox. Microsoft sold boxes at a loss right out of the gate, making its profits when you buy games and Xbox Game Pass subscriptions instead of on the hardware alone. That’s not our speculation — it’s exactly what Microsoft told The Verge in 2021. In 2023, we learned that Microsoft may have spent $1.5 billion to make sure it could sell the Xbox Series X and S at $499 and $299 respectively, instead of what they actually cost.
But Microsoft has suggested that it’s done with hardware subsidies. “Going forward, this cannot continue,” wrote Sharma in her “Xbox reset” memo, referring to the $20 billion in content, platform, and hardware subsidies Microsoft made over the past five years.
Microsoft CEO Satya Nadella echoed that idea on the Hard Fork podcast: “No one can accuse Microsoft of not having invested for the last 25 years, and now we have to turn this into a sustainable business.”
It isn’t just new management that’s hinting at no more subsidies: Bond primed the pump for a $1,000 box when she called Helix “a very premium, very high-end curated experience” late last year, comparing it to gaming PCs like the $1,000 Xbox Ally X handheld.
Perhaps Microsoft has changed its mind since then. “We are working very hard to rethink everything that we can about Helix,” Ball said in June, referring to affordability. “The plan’s the plan until it’s not the plan,” Sharma said in February (though not about affordability specifically).
But subsidies would be a tremendous risk if the Helix still plays PC games in addition to Xbox ones. Valve’s Steam is by far the dominant PC gaming platform — so PC gamers who buy a Helix won’t help Microsoft recoup its money.
There’s another way Microsoft could subsidize a $1,200 Xbox.
Today, AT&T will give you a $1,200 iPhone 18 Pro for $0* — if you lock yourself into 36 months of AT&T phone service that costs $100 or more per month and trade in a recent phone, too.
Microsoft could do the same with a new, pricier tier of its Xbox Game Pass game subscription service, effectively bundling the games with the console and making you slowly pay for both at the same time. Perhaps you’ll have the option to buy an “unlocked” Xbox for full price, but it won’t be the norm.
To make it happen directly, Microsoft would need a pricier new tier of Xbox Game Pass, which wouldn’t necessarily align with the company’s recent moves. Sharma actually cut the price of Game Pass Ultimate to $22.99 a month in April, writing that “Game Pass has become too expensive for players,” while removing Call of Duty games and unlimited access to Xbox Cloud Gaming from the deal.
I don’t know if it would work. People feel naked leaving the house without phone service. They might not feel the same about games. Subscription fatigue is real. But if it worked, Microsoft’s moat would be stronger than ever. You’ll be more likely to play the games you’ve already paid for and are committed to keep paying for. Many would get sucked into a profitable upgrade cycle, just like they do with phones, since they can buy the next Xbox for “$0” as soon as it comes out.
Cellphone subsidies have been around nearly as long as pricey phones: The 1994 IBM Simon, arguably the first smartphone, eventually cost half its $1,100 price tag if you signed a contract with BellSouth. My first phone, a Kyocera QCP-6035 with a built-in PalmPilot, was subsidized when it arrived in 2001. So it’s not exactly a “radical new business model,” but it would be new for game consoles.
It’s also possible that Microsoft simply doesn’t plan to sell a console to the masses anymore — it can sell an $1,800 Xbox to those who can afford “video game ownership” and try to hook everyone else on the Netflix model.
After all, the “K-shaped economy” and RAMageddon have already made gaming PCs and existing game consoles into luxury goods. Society’s wealthier individuals seem perfectly happy to pay inflated prices for the few consoles Sony and Microsoft still pump out.
While PS5 sales plummeted after Sony’s price hikes, that may have been about component shortages rather than decreased demand. Xbox sales reportedly rose over a similar period, and Microsoft has justified repeated, dramatic price hikes on its consoles since May 2025.
“I can tell you definitively, demand for our console exceeds supply. We are putting them in as many stores as possible, we are producing them as quickly as possible. There is a severe limitation to how quickly we can do that,” Xbox chief strategy officer Matthew Ball told The Game Business in June, blaming RAM shortages.
But Microsoft has another way of giving less affluent people access to “next-gen” Xbox power. It can rent you one. The company just launched pay-as-you-go cloud gaming starting at $3.99 for 10 hours of cloud gaming (50 hours for $11.99).
Maybe all of Microsoft’s recent talk about affordability isn’t about the masses owning a next-gen console. Maybe it’s about finding an affordable way for people to “play Xbox” without owning the games at all.
