Xbox CEO Asha Sharma has warned that the current shortages and high pricing of computer memory — the “RAM crisis,” as it’s known — will result in “radically different business models” for game consoles, and that these will come into effect as soon as this year.
Sharma told Fortune that Microsoft “must think about other options” about how to market game consoles, from pricing plans to partnerships, in the face of hardware that will be too expensive for a mass audience. And, while she reiterated plans for Project Helix — the next-gen Xbox, a high-end, PC-compatible console — Sharma suggested that the console market would have to reconsider its exclusive focus on “premium, high-performance” hardware and consider making less resource-intensive games.
Sharma’s remarks come on the heels of similar comments from Sony CEO Hiroki Totoki, who, with respect to PlayStation 6, said Sony “must think carefully what we will do” and “consider changing business models.” Sharma went into a bit more detail, which helps elucidate the kinds of changes that players and the game industry might be looking at.
Sharma laid out the challenge facing console manufacturers in stark terms that help explain why, for example, Valve recently increased the price of Steam Deck by $300. “There’s a shortage of memory and storage, and the costs are exponential,” she said. “Usually at this point in the generation, they’re about 50% of the cost, and we’re seeing they’re up 2.75x,” Sharma said. She said prices had increased by 50% in just the 100 days since she accepted her new job. “They’re going to be up, effectively, 7.5x.” Meanwhile, shortages are such that Microsoft is “having a hard time” meeting demand for Xbox Series consoles, never mind selling more of then, or making a more powerful successor.
“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,” Sharma said, “and so I think we’ll start to see radically different business models that we never expected start to come into orbit later this year.”
What might those business models look like? Sharma appeared to suggest that mobile-like payment plans are one way forward, perhaps even in partnership with other businesses, the way smartphone plans are bundled with cell service contracts. “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,” she said. “We must think about partnerships that will allow us to have better distribution and reach.” Broadband suppliers might be such a partner. (Xbox has tried payment plans before, with Xbox All Access, but the program was discontinued.)
But Sharma went further, intimating that the video game industry’s traditional model of pushing out new, cutting-edge hardware every seven years or so is no longer fit for purpose. She said “new business models” were what the console market needed, “rather than just the most premium, high-performance console in the world.” She admitted that there was “material work to do” just to make sure Project Helix can make the market at all.
Perhaps most tellingly, Sharma said that video game technologists could no longer take large amounts of storage and memory for granted, and that this will change how games are made. “I think that we have to think very differently about storage and memory going forward,” she said. “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 the device. 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.”
Are the days of the 100 GB AAA game numbered? After decades of file size inflation as a given, it’s a surprising thought. But if normal people can’t afford a 1 TB hard drive, it might become imperative. It’s also interesting that Sharma’s definition of new business models seems to extend beyond how players will pay for high-end hardware to whether they need it in the first place — in the same breath as she admits the obvious challenges Xbox faces in making Project Helix remotely affordable. (Note that she said “thousands of dollars,” plural.)
These are unprecedented times for the video game business, and nothing is off the table. In the short term, the increased cost of computer hardware is very bad news for players. But if the industry is forced off the path of constant tech escalation and toward different, more sustainable forms of innovation that don’t involve us buying a new console every seven years, would that be such a bad thing?
Everything we know about Project Helix, the next Xbox console
Here’s what we know, what we think we know, and what we don’t
