Xbox exploring ‘radically different’ console business models

The RAMageddon crisis has got Microsoft rethinking its Xbox console hardware business. Xbox CEO Asha Sharma and Xbox strategy chief Matthew Ball have both revealed this week that Microsoft is reevaluating plans for its next-generation Project Helix console and exploring “radically different” console business models in the meantime.

“We are working very hard to rethink everything that we can about Helix, which is a console we are committed to shipping, and we are very cognizant of the ways in which we need to change as a company to make sure it is affordable, to make sure that it’s flexible,” said Ball in an interview with The Game Business earlier this week.

Microsoft’s former Xbox president Sarah Bond described its next-gen Xbox console as “a very premium, very high-end curated experience” back in October, before the industry-wide constraints on memory and storage really started to hit. Sharma is now looking at ways to navigate the RAMageddon crisis, with a focus on affordability for current and next-gen Xbox consoles.

“On hardware, we are in a crisis right now, the entire industry is,” said Sharma in an interview with Fortune. While the costs of memory and storage keep rising, Xbox is looking at different ways to combat the underlying price pressures. “We must think about other ways to think about the cost construction of a console. We must think about how we create different plans, so more people can participate in the console,” says Sharma. “We must think about partnerships that will allow us to have better distribution and reach.”

Microsoft is now looking at new business models for consoles, and “what is needed for console rather than just the most premium, high-performance console in the world,” according to Sharma. “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.”

Microsoft has many options, particularly if it’s weighing up more partnerships. In the past, the company has bundled Xbox hardware with Game Pass subscriptions, creating an easier way for gamers to finance the cost of a new console over a 24-month period. Xbox All Access was quietly discontinued last year, after many retailers pulled out of the program. It’s possible Microsoft could launch something similar, if it’s prepared to subsidize Xbox hardware further to tempt consumers into subscriptions.

Sharma also teased that Microsoft is preparing to “do more this summer” with Xbox Game Pass “to create more flexible offerings” for the subscription service. One of Sharma’s first big Xbox changes was cutting the price of Xbox Game Pass Ultimate in April. Microsoft also partnered with Discord last month to bundle a free Xbox Game Pass “starter edition” with Nitro subscriptions.

Microsoft could also focus on more ad-supported options for Xbox. The company has been working on a free Xbox Cloud Gaming option for well over a year now, and previously confirmed it was in testing in October. While this will help Microsoft attract consumers who don’t want to purchase increasingly expensive game consoles, it’s not “radically different” from what exists today.

Radically different would be something like Telly, a startup that offers you a free TV in exchange for watching ads. Radically different could also hint at Microsoft allowing others to make Xbox consoles. Microsoft has already been exploring this with its Xbox-branded handhelds with Asus, and the next Xbox, codenamed Project Helix, could go a step further. Microsoft has previously hinted it will be some kind of hybrid of a console and a PC, and if other PC OEMs are able to create Xbox-branded devices based on AMD’s new chips it may well help with affordability.

Both Sharma and Ball have also hinted that the next Xbox also needs to be more flexible. “I think that we have to think very differently about storage and memory going forward,” says Sharma. “We will have to apply new techniques, so that we can compress that. We will have to empower customers to have very flexible storage offerings. We will have to empower new types of games, so they can fit on device, and so there’s going to be a lot of innovation. This will take years, not days, not weeks, but we’ll go through it together with the community.”

Reading between the lines, it sure sounds like Microsoft is looking at making sure Project Helix owners will be able to extend storage without expensive proprietary solutions like the Xbox expansion cards found on the Xbox Series S / X. Sony opted for standard M.2 SSD expandable storage support on the PS5, and while it wasn’t as friendly to use as simply slotting in an Xbox expansion card, it was a lot less expensive for PS5 owners.

There’s no quick fix for Microsoft’s Xbox console pricing, but it’s not an easy issue for the rest of the industry to navigate either. We’ve already seen PS5 sales plummet after price rises, and Valve also raised Steam Deck prices by more than $200 last month. All eyes are now on Valve’s pricing for its Steam Machine this summer, which could hint at the direction of Xbox and PlayStation pricing decisions.