Xbox CEO predicts a permanent shift in console business models.

Xbox CEO Asha Sharma has raised concerns about the ongoing shortages and soaring prices of computer memory, commonly referred to as the “RAM crisis.” She predicts that this situation will lead to “radically different business models” for game consoles, with changes expected to roll out as soon as this year.

In a recent discussion, Sharma emphasized that Microsoft needs to explore alternative strategies for marketing game consoles, including new pricing structures and partnerships, as the rising costs of hardware may alienate a broad audience. While she reaffirmed the vision for Project Helix—an advanced, PC-compatible Xbox—Sharma hinted that the console market might need to shift away from its exclusive focus on “premium, high-performance” hardware and consider developing less resource-intensive games.

Her comments echo those made by Sony CEO Hiroki Totoki, who indicated that the company must carefully evaluate its approach for the upcoming PlayStation 6 and consider altering its business models. Sharma provided more insight into the challenges that console manufacturers face, which helps clarify the recent price hike of the Steam Deck by $300. “There’s a shortage of memory and storage, and the costs are exponential,” she noted. “Typically, at this stage in a console generation, costs are about 50% of what they are now, but we’re seeing them rise to 2.75 times that.” She pointed out that prices have surged by 50% in just the last 100 days since she took on her role, predicting an overall increase of 7.5 times. Meanwhile, Microsoft is struggling to meet the demand for Xbox Series consoles, complicating plans for a more powerful successor.

“I think we’ve reached a point where it’s hard to envision mass audiences spending thousands of dollars on a console,” Sharma stated, suggesting that we will soon see unexpected business models emerge later this year.

What could these new business models entail? Sharma hinted at the possibility of mobile-style payment plans, potentially in collaboration with other companies, similar to how smartphone plans are bundled with cell service contracts. “We need to rethink how we structure console costs and explore different plans to make them accessible to more people,” she said. “We should consider partnerships that enhance distribution and reach.” Broadband providers could be potential collaborators. (Xbox has previously experimented with payment plans through Xbox All Access, but that program has since been discontinued.)

Sharma also suggested that the traditional model of releasing new, cutting-edge hardware every seven years may no longer be viable. She emphasized the need for “new business models” in the console market, moving beyond just creating the most advanced hardware. She acknowledged that significant work is required to ensure Project Helix can even enter the market.

Perhaps most importantly, Sharma indicated that the gaming industry can no longer assume ample storage and memory will always be available, which will inevitably influence game development. “We need to rethink our approach to storage and memory,” she said. “We will have to adopt new techniques for compression and offer customers flexible storage options. We must enable new types of games that can fit on devices. This will drive a lot of innovation, but it will take time—years, not days or weeks—and we will navigate this journey alongside the community.”

Are we witnessing the decline of the 100 GB AAA game? After years of increasing file sizes, it’s a thought-provoking possibility. If average consumers can’t afford a 1 TB hard drive, it may become a necessity. It’s also intriguing that Sharma’s vision of new business models extends beyond payment methods for high-end hardware to questioning whether such hardware is even necessary—especially given the significant challenges Xbox faces in making Project Helix affordable. (She did mention “thousands of dollars,” plural.)

These are unprecedented times for the gaming industry, and everything is on the table. In the short term, the rising costs of computer hardware spell trouble for players. However, if the industry is pushed away from relentless technological escalation and toward more sustainable forms of innovation that don’t require us to buy a new console every seven years, could that ultimately be a positive shift?

Here’s what we know, what we think we know, and what we don’t.