This article was originally published on October 24, 2025 - read the full issue

By Rob Fahey

Saying that Microsoft's gaming business is in the throes of a major transition is accurate on the face of it, but it doesn't really capture just how messy and difficult that transition is – or how uncertain we all are about its eventual outcome.

The transition from a traditional console hardware and first-party publishing business into whatever Xbox is becoming is turning out to be less a silent, delicate chrysalis waiting for a beautiful butterfly to emerge, and more in line with bits falling off Jeff Goldblum in The Fly as we watch in dreadful anticipation to see what he's turning into.

If I'm going to compare the state of Xbox to Cronenbergian body horror, I should preface it by noting the very obvious – that Microsoft's presence in the videogame business over the past 20 years has been an immense net positive, and that a healthy, thriving Xbox ecosystem is something any creator or consumer of games should wish for and celebrate. The company's counterbalance to Sony, in particular, has been of huge benefit to us all over the years.

By some measures, Microsoft's game division is stronger than it's ever been. It is now one of the largest publishers in the world, thanks to a gigantic spending spree that saw it absorb Activision Blizzard and Zenimax along with a significant number of independent studios.

The scale of that publishing business has significantly outgrown the Xbox hardware platform. Microsoft would never make back its tens of billions in investment just by selling games to Xbox console owners – something which it's known from the outset, of course. The economics of those acquisitions made a future as a major third-party publisher inevitable.

The company's attempt to square that circle has been to redefine what an Xbox is. Everything is an Xbox, according to Microsoft's recent marketing. Xbox is now a broad concept for a set of gaming services that get a bit fuzzy around the edges – so much so that the most recent 'Xbox' devices launched, the ROG Xbox Ally handhelds, don't actually play native Xbox games.

What they do is play PC games; thus, Microsoft's position appears to be that a PC device that's hooked up to a Game Pass subscription is now, for all intents and purposes, an Xbox. It's certainly true that there is significant overlap in the game library between the devices, but the incongruity of these very expensive handhelds (the higher-end model comes in at $1,000) bearing the branding of a console whose games they're not compatible with remains striking.

It also feels like a taste of things to come – especially the "expensive" part. Interviewed this week by Mashable, Xbox president Sarah Bond hinted that the company's follow-up to its current generation of home consoles will be "a very premium, very high-end curated experience," and indicated that the Xbox Ally series encapsulates some of the same thinking that's informing the creation of this next-gen device.

Some of that might just be marketing buzzword bingo, but it feels that Bond is preparing the ground for future Xbox hardware to be priced firmly at the upper end of the market. That would mark a major shift for a platform whose early success in the current generation came largely from doing a great job of undercutting competitors with the aggressively priced Series S.

Any surprise at such a change, however, has been dulled by Microsoft's more recent pricing moves. Within a matter of a few months, the company has significantly raised the prices of its consoles, its Game Pass subscriptions (some fans noted bitterly that when they said they wanted the company to return to the 360 era, charging $360 a year for Game Pass wasn't what they had in mind), and most recently even hiking prices for its development kits.

On a very practical level, yes, this is about a division under huge pressure to generate revenues that can justify the enormous sums spent on acquisitions to give it a leg up in the market. I do think there's something more happening here as well, though – a genuine attempt to position Xbox-branded hardware as being the premium, high-end way to access the broader 'Xbox ecosystem'.

Much of the speculation around the next-gen Xbox is that it'll do away with the separation between console and PC entirely, being essentially a custom Windows PC focused on the gaming experience (though no doubt also replete with the AI junk Microsoft is currently huffing deep into its gasping lungs).

That would be in line with the Xbox Ally approach – even more so if it's being co-created with a partner hardware company. It would also be an expensive device. Giving up the benefits of a console platform – notably a lightweight, single-purpose OS that lets developers optimise tightly for a fixed target spec – means having to go toe to toe with gaming PCs on raw performance, and that will not come cheap.

Given that Bond's comments about the "premium" nature of the next-gen Xbox were made in the context of discussing the Xbox Ally devices, it's fair to speculate that the company is considering a similar or even higher price point – in other words, north of $1,000. If that turns out to be the case, Phil Spencer shouldn't be surprised when his dig at the PS5 Pro price from November last year – when he stated that $1,000 consoles wouldn't grow the gaming market – is quoted back to him.

The shape of Xbox in a world where everything is a (potential) Xbox does seem to be coming into focus. If your smartphone, your tablet or your laptop are all potential Xboxes, then Microsoft seems to feel that actual Xbox-branded hardware can be premium, aspirational devices for the hardcore, the connoisseurs, and those with money to burn.

As long as everyone keeps paying their Game Pass subscriptions, Microsoft would probably be very happy for Xbox hardware to be an expensive niche rather than a true competitor to the likes of PlayStation or Switch. Whether a world that's already turning sour on the expense of gaming as a hobby is ready to embrace Xbox as a premium, luxury product, however, is another question entirely.

This article was originally published on October 24, 2025 - read the full issue