Xbox CEO Asha Sharma has suggested that the next Xbox console could introduce 'radically different' business models, as she addresses the current hardware crisis. The future of Xbox is one of the biggest questions heading into the next generation console race, but some details about Microsoft's new system are already known.
Project Helix and the Memory Shortage
The console, codenamed Project Helix, will be backwards compatible and capable of running PC games. Under previous leadership, it was described as a 'very premium' system heralding the 'largest technical leap you will have ever seen in a hardware generation.' However, circumstances have changed significantly. Microsoft appointed a new Xbox CEO, Asha Sharma, in February, and since late last year, the electronics world has been affected by an ongoing memory shortage that has caused current console prices to skyrocket.
In an interview with Fortune, Sharma addressed the changing technological landscape, implying that Microsoft is exploring different business models to make its next console more affordable. 'On hardware, we are in a crisis right now,' Sharma said. 'The entire industry is. There's a shortage of memory and storage, and the costs are exponential. They are usually at this point in the generation, about 50% of the cost, and we're seeing they're up 2.75x, they're up 50% since they started, they're going to be up effectively 7.5x.'
Exploring New Options
Sharma emphasized that pricing is just one lever and that other options must be considered. 'We must think about other ways to think about the cost construction of the console. 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.'
She did not specify what these plans could be but suggested that creating the 'most premium' console might not be the best path forward. 'We will continue to look at new business models. I think [that is] what is needed for console, rather than just the most premium, high-performance console in the world. 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. So I think we will start to see radically different business models that we never expected start to come into orbit later this year.'
Flexible Storage and Memory Solutions
Sharma mentioned that 'flexible' memory and storage options could be a potential solution but warned it would take 'years' to solve. This may hint at a new lower-cost console similar to the Xbox Series S, or perhaps selling hardware at a loss and recouping money through increased in-game and dashboard advertising. 'For us, I think that we have to think very differently about storage and memory going forward,' she added. '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 gonna be a lot of innovation. This will take years, not days, not weeks, but we'll go through it together with the community.'
Rethinking Project Helix
It is unclear how much Microsoft could meaningfully alter Project Helix to make it more affordable at this stage, especially if it is expected to launch in 2027. However, Xbox's chief of strategy officer, Matthew Ball, also suggested at Summer Game Fest that Microsoft is undergoing a drastic rethink. Speaking at The Game Business Live about how the memory shortage will impact Project Helix, Ball said: 'We are working very hard to rethink everything that we can about Helix, which is a console we are committed to shipping. We are very cognisant of the ways in which we need the change as a company to make sure it is affordable, to make sure that it's flexible. We are working hard to rethinking what that console can look like, not in an exclusionary way, but in an additive way, so that as we take a look at this crisis, which may have acute effects for 2-2.5 years.'
Industry-Wide Impact
This is not just a problem for Microsoft. Sony and Nintendo have raised the prices of the PlayStation 5 and Nintendo Switch 2 respectively due to the memory shortage, leaving a big question mark over how much the PlayStation 6 will cost. It all paints a picture that Xbox, following its renewed management and recommitment to exclusives, is struggling to reverse past mistakes.
Exclusivity Strategy May Shift
On the topic of exclusivity, Sharma even suggested the pivot back to exclusives could change again. 'I think that we are the number two publisher in the world, and when you do that, you want your games to be everywhere,' Sharma said. 'You're stronger when the world plays with you. At the same time, we're increasingly becoming more of a platform, and it's hard to find examples of platforms out there that don't have exclusive services and content. And so this is a journey for us. Our business isn't particularly healthy as you noted, and so we're starting by introducing one to two signature exclusives and, as the business is healthy, we will look to try and do more.'
While not stated explicitly, this suggests that if Xbox console sales do not pick up by making Gears Of War: E-Day and Clockwork Revolution platform exclusives, this whole strategy could be reversed in the future. Sharma has become CEO of Xbox at a difficult time, where key decisions around Project Helix have likely already been locked in, but with the backdrop of a memory crisis and ballooning costs, it is hard to see how Xbox can crawl its way back into a competitive position against Sony and Nintendo.
