Microsoft is upping the price of its current generation consoles for a third time in two years. A September price increase made the 2TB Xbox Series X $800; Thursday, Microsoft axed that console entirely, because now the 1TB Xbox Series X costs $800. The company announced the news amid reports that mass layoffs at Xbox businesses are coming or underway.
The 512GB consoles will increase by $100, and the 1TB models will increase by $150, Microsoft wrote in a post on Xbox Wire. The pricing goes into effect globally on Aug. 1.
"We hoped another price increase would not be necessary, and we have spent the last several months working with suppliers on options," a Microsoft representative wrote in the post. "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."
To break it down, the 1TB Xbox Series X will be $799.99 and the disc-less version will be $749.99. The 1TB Xbox Series S is priced at $599.99, while the 512GB version is $499.99. Before the three price hikes, the 512GB Xbox Series S cost $299.99. The 1TB Xbox Series X launched at $499, and the 2TB version began at $699.
Microsoft introduced a couple ways to make Xbox consoles "more accessible," as it put it in the news release. As reported on recently, Microsoft writes it has "made it easier for players to use" its Buy Now, Pay Later program, as well as "interest-free financing" on Amazon. Companies that offer Buy Now, Pay Later, such as Klarna, have been criticized for their practices; it's a loan, and that can mean debt. The nature of the payments means it's easy to pile multiple Buy Now, Pay Later purchases up and risk of overspending without realizing it. And though they're billed as interest free, these companies often have fees if payments are made late. But price increases everywhere incentivize people to look toward these payment plans to afford essential items; you can even use it for food on DoorDash.
Yes, all of this is nuts. Artificial intelligence and the increase in data centers to support it created a major component shortage. (All that energy to create PowerPoint presentations and AI slop!) Taiwan Semiconductor Manufacturing Company (TSMC) said recently that inflation is also to blame. There simply isn't enough memory components to go around, driving the price way, way up. Most technology industries are impacted, and management consulting firm Kearney expects the shortage to last until 2028, or longer. The other console manufacturers—Nintendo, Valve, and Sony—have both increased prices, too.
On Thursday, even Apple upped its MacBook and iPad prices, some by nearly 20%. "The consumer electronics industry is facing an unprecedented challenge,” a company representative said in a statement to press. “The rapid expansion of AI data centers has created an extraordinary surge in demand for memory and storage. We have never seen a component price increase this much, this quickly.” Apple CEO Tim Took told the Wall Street Journal last week that the shortage is "a hundred-year flood."
Game consoles are hardly a necessity, but the increasing unaffordability of consumer technology is devastating. Technology is embedded into every part of our lives: phones, computers, and now even kitchen appliances. The shortage created by AI will touch most industries.
As Chris put it on the Aftermath Hours podcast last week, Microsoft is causing the problems that it's having. Microsoft has pledged to spend billions of dollars on data center leases, Bloomberg reported this week. Billions! One hundred forty six billion on AI infrastructure in 2026, in fact, despite Microsoft CEO Satya Nadella saying at an event in January that AI still has to "get to a point where we're using this to do something useful."
"We as a global community have to get to a point where we're using this to do something useful that changes the outcomes of people and communities and countries and industries," Nadella said. "Otherwise, I don't think this makes much sense. In fact, I would say we will quickly lose even the social permission to actually take something like energy, which is a scarce resource, and use it to generate these tokens."
Microsoft is one of the major funders of the AI boom causing the memory crisis. "Not only are they stepping on every rake, but they also run the rake factory," as Nathan put it.
Meanwhile, Microsoft is facing a "bloodbath" of layoffs, as Bloomberg reporter Jason Schreier put it. The company is reportedly looking to close South of Midnight developer and Peabody Award-winning Compulsion Games, as well as Double Fine and Ninja Theory. (Bloomberg reported the studios were negotiating their future with Microsoft.) Several employees at Compulsion Games have posted to LinkedIn and other social media looking for new jobs in the past several days. Insider Gaming executive editor Mike Straw said on BlueSky that layoffs may be underway at ID@Xbox, Microsoft's program for independent developers to publish their works.
Aftermath has reached out to Microsoft for more information.
