Microsoft may be done making Xbox cheap
This is nothing new to Xbox lovers. It isn't a cheap system. But it's the cheapest way to enter Microsoft's gaming universe. You buy the box and plug it into your TV. Later, you can spend money on games, controllers, subscriptions, and downloadable content. The deal no longer works like that. ...
Overview
This is nothing new to Xbox lovers.
It isn't a cheap system. But it's the cheapest way to enter Microsoft's gaming universe. You buy the box and plug it into your TV. Later, you can spend money on games, controllers, subscriptions, and downloadable content.
The deal no longer works like that.
Microsoft (MSFT) indicated that starting Aug. 1, Xbox console prices will increase worldwide, with 512 GB variants rising by $100 and 1-TB devices by $150. And the corporation is also killing the 2TB Xbox Series X.
That's a major move for a piece of gear that came out in 2020. At this point in the usual console cycle, gamers are usually looking forward to bundles, discounts, and Christmas bargains, not another price hike.
Microsoft has an easy answer to the problem: Memory and storage costs have soared. But the bigger picture might be more worrying for Xbox enthusiasts.
The company may no longer care about saving the old console deal.
The Xbox was Microsoft's entry-level product for the living room. The desire for AI is driving up component prices, while Microsoft’s increased emphasis on Game Pass, cloud gaming and cross-platform releases now makes the console feel less like the heart of the plan and more like an expensive gateway to a far larger ecosystem.
“We hoped another price increase would not be necessary,” Microsoft said in its Xbox Wire update. The company added that console storage and memory prices have increased by more than 2.5x and could double again by fall 2027.
Microsoft changes the old Xbox bargain with gamers
The console business is a funny business.
Most hardware vendors are interested in making money from selling the device itself. Console makers have often been willing to do the opposite. The console attracts players into the ecosystem, and the real money is to come.
So when Microsoft increased the price of the Xbox, it felt like more than a regular price increase on electronics.
It challenges one of the oldest assumptions in gaming: that console makers would accept some hardware pain to keep players connected to their platform.
Microsoft has seen that model before. Phil Spencer, the former Xbox boss, said the company lost about $100 to $200 on each console it sold in 2022, and expects to make that money back through games, accessories and purchases on its storefront.
That was the old Xbox math.
The new math is different.
Related: The AI memory crunch just came for Xbox gamers, too
Microsoft is not increasing the price of a new console with the latest features. It is boosting prices on an aging hardware line at a time when most buyers would reasonably expect the opposite.
Which makes the adjustment look less like a spontaneous reaction and more like a calculated statement.
Microsoft may still want to put Xbox systems in homes, but not at the cost of continuing to take the same losses. If memory and storage become unaffordable, the company looks ready to pass more of that expense directly onto gamers.
That's what counts.
The AI explosion may explain the cost pressure, but Microsoft's response illustrates how the business views Xbox hardware currently. But the console is still significant, but it may not be sacred.
Xbox price hike shows hardware may matter less to Microsoft
Microsoft is not backing away from gaming.
It is doing something more subtle: it is reducing the value of the box.
Xbox is now a console, PC, cloud gaming, mobile display, and subscription service. Microsoft gets recurring revenue from Game Pass. Microsoft owns some of the richest franchises in gaming. Azure gives you the infrastructure to grow access from the cloud. Windows keeps it very much PC gaming-related.
That’s the thing that differentiates Xbox from the old console-war concept.
Details
But Sony’s gaming identity is so wedded to PlayStation hardware. Nintendo continues to grow its company on the back of essential gadgets and exclusive experiences. Microsoft has other means to appeal to players than selling consoles.
That makes the Xbox price increase genuine.
Microsoft can afford to make the console less attractive because it’s not the only route into Xbox anymore.
More AI:
- Goldman Sachs has blunt message for AI stock investors
- Microsoft CEO sends a blunt warning on AI and the tech ecosystem
- The next AI infrastructure race has nothing to do with chips
Microsoft is trying to minimize the blow. The company said it would introduce buy now, pay later options; 0% APR financing through partners; trade-in programs; and certified refurbished consoles.
It could appeal to budget-conscious shoppers. But they also point to the shift.
Microsoft isn’t dropping the price of the Xbox; it’s just making it easier to finance a more costly Xbox.
That’s not quite the same.
It means the company is trying to maintain access to the ecosystem without keeping the current hardware subsidies intact. For gamers the monthly charge can be fair. For Microsoft, the math may be neater.
AI costs are forcing a new gaming reality
Microsoft’s story is not so readily rejected.
The artificial intelligence boom that has pushed chipmakers and data-center providers sky-high is now straining the consumer electronics market. Memory companies are focused on high-bandwidth memory needed in AI infrastructure, such as Nvidia (NVDA) graphics processing units.
This has pushed up the prices for storage and memory in the wider hardware market.
But this is not a Microsoft issue alone: Apple (AAPL) recently raised prices on some Macs and iPads. The same component bottleneck that is making the AI servers more expensive is now making the conventional consumer products more expensive.
Microsoft isn't oblivious to the irony.
Among the biggest winners in the AI buildout are corporations. It’s at the center of the next chapter of enterprise technology, thanks to its cloud business and partner-led AI strategy. But Xbox is on the other side of this boom, where rising component prices hit the hardware business directly.
That is, Microsoft is benefiting from AI in the cloud, and Xbox buyers are paying some of AI’s costs at checkout.
There's a tension that makes this more than a story about gaming.
That’s a sign the AI growth is beginning to redistribute costs around in the IT business. Upside opportunities for investors include cloud expansion, chip demand and data center spending. Consumers might see it in higher pricing for computers, tablets and consoles.
Key takeaways from Microsoft’s Xbox price hike
- 2020: Microsoft launches the Xbox Series X and Xbox Series S.
- 2022: Phil Spencer says Microsoft loses roughly $100 to $200 on each Xbox console sold.
- October 2025: Microsoft raises U.S. Xbox console prices by $20 to $70.
- June 25, 2026: Microsoft announces another worldwide Xbox price increase.
- Aug. 1, 2026: Xbox 512 GB models rise by $100, while 1 TB models rise by $150.
- Fall 2027: Microsoft says console storage and memory prices could double again.
Microsoft is concerned that higher prices could cause some players to walk away from Xbox devices altogether.
That might hurt less than it would have.
You can sign up for Game Pass on PC even if you don’t have an Xbox console. A player who doesn’t buy the package might still play Microsoft-owned games elsewhere. A gamer outside the console environment can still be important to Microsoft if they are part of its broader gaming network.
And therefore, the price bump feels like a tipping point.
Microsoft is claiming that Xbox hardware is relevant. It’s a hint, in terms of pricing, that Xbox hardware might not be worthy of the same subsidy it formerly was.
The message for gamers is stark: the cheap-console era is over.
The wager is just as clear for Microsoft.
Xbox doesn’t need to conquer the living room if it can follow players wherever else.
Related: Xbox fans waiting on Project Helix get unexpected news from Wedbush
Source
Originally published at www.thestreet.com.
