Microsoft has announced significant price rises for Xbox consoles, blaming the ongoing “components crisis.”
In a blog post, Microsoft said that from August 1, the price of Xbox consoles will increase by $100 for 512GB models, and $150 for 1TB models. The 2TB model will be discontinued.
“Last October, we increased Xbox console price by $20-$70 in the U.S.” Microsoft said. “We hoped another price increase would not be necessary, and we have spent the last several months working with suppliers on options. Unfortunately, console storage and memory prices have increased by more than 2.5x and we expect another doubling by the fall of 2027.
"The entire consumer electronics industry is struggling with the current components crisis, but the effects are particularly hard on consoles. Unlike phones, computers, speakers, and other consumer devices, consoles are typically not sold at a profit, but instead for less than they cost to make.”
Alongside the price rise announcement, Microsoft pointed to Buy Now, Pay Later options that break up your payments, as well as interest free financing. It’s also working with retailers to make second-hand consoles available at lower prices, it said.
“Players who are ready to upgrade or no longer use their console will be able to trade it in with participating retail partners for cash or store credit. Those consoles will then be made available at lower prices for players,” Microsoft said.
Then there are ‘Certified Refurbished Consoles,’ which are available at Microsoft Stores for up to $100 off.
The anouncement of the Xbox console price rises comes ahead of the release of GTA 6 in November, which is expected to increase demand for PS5 and Xbox Series X and S significantly. However, there are concerns that neither Sony nor Microsoft will be able to meet the demand caused by the release of GTA 6, with the AI boom making it particularly hard for hardware manufacturers not only to source components, but to release products at affordable prices.
Earlier this month, new Xbox CEO Asha Sharma said the spiralling cost of new and existing consoles would require "radically different business models" over the coming generation. She added that the industry had "reached a point where it will be hard to imagine" mass audiences still being able to afford "thousands of dollars" for a new console generation.
The current PS5 and Xbox Series X and S generation of consoles have seen price increases rather than cost savings. Sony itself raised the price of PS5 consoles back in March, blaming “continued pressures in the global economic landscape.” Nintendo has also not been immune, and recently acknowledged it would up the price of Switch 2, just over a year after its arrival. And Valve has bemoaned its struggle to release Steam Machine at the price it had initially hoped, instead having to go for an eye-watering $1,049.
By way of comparison, the PS5 currently costs $649.99, the PS5 Digital Edition costs $599.99, and the PS5 Pro costs $899.99.
Xbox is currently in the process of what Sharma called a "reset," which is expected to result in significant layoffs. There is concern over the future of Hellblade developer Ninja Theory, South of Midnight developer Compulsion Games, and Psychonauts developer Double Fine, although all Xbox studios are said to be worried about what happens next.
Sharma's ground-shaking memo revealed that Microsoft's gaming business currently has a 3% accountability margin (assumed to mean profit margin), which is down year-on-year. "Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue," Sharma said.
Following the release of the memo, Microsoft CEO Satya Nadella said "there's more monetization of Xbox games happening on YouTube" than at Xbox, adding that the Xbox team needed to figure out how to "innovate both in hardware, as well as in the games, going forward in an economically viable way."
"No one can accuse Microsoft of not having invested for the last 25 years," Nadella added. "Now, we have to turn this into a sustainable business that delivers what is fundamentally one of the best sources of entertainment, still."
Wesley is Director, News at IGN. Find him on Twitter at @wyp100. You can reach Wesley at wesley_yinpoole@ign.com or confidentially at wyp100@proton.me.
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