Microsoft doesn't know what to do about the memory pricing crisis Microsoft is causing

Due to the memory pricing crisis that its own AI ambitions are helping cause, Microsoft does not know how to sell a new Xbox that feels cutting-edge at a price that regular people can afford.

The next Xbox, codenamed Helix, will have "leading-end performance," new Xbox boss Asha Sharma said in a recent interview with Fortune, but I'm left wondering how Microsoft defines that, because everything else she said downplays its likely technical capabilities.

What the console business needs is "new business models" rather than "just the most premium, high-performance console in the world," Sharma said.

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"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," she said. "So I think we will see radically different business models that we never expected come into orbit later this year."

It's an astonishing place we're in. Consumer devices always involve compromises for the sake of affordability, but this is the first time I can remember a tech company lowering expectations for its next big gadget so dramatically.

Sharma went on to say that Microsoft will "have to think very differently about storage and memory going forward."

"We will have to apply new techniques so that we can compress [games]," the Xbox CEO said. "We will have to empower customers to have very flexible storage offerings. We will have to empower new types of games so that they can fit on-device."

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The problem was reiterated today in an open letter to Xbox employees, with no specific plan laid out to solve it. Sharma did present outlines of ideas in the interview, but Xbox has already done "flexible storage options," and what it means to "empower new types of games so that they can fit on-device" is anyone's guess. (And are they going to put "Now with smaller games!" on the box?)

As for "new business models," perhaps Microsoft will offer financing? A rent-to-own plan?

Another guess is that we're talking about cloud streaming. It's not a strictly new—RIP Stadia—but it fits in well with big tech's AI obsession. At a GDC session I attended in March, Nvidia DLSS pioneer Bryan Catanzaro said that "AI is fundamentally much more efficient in the cloud." That's a useful premise if you want to move toward a world where games are served like Netflix shows and at-home devices can get by with less RAM and SSD space.

For now, it's clear that Microsoft is still trying to figure out what to do about this self-inflicted problem.

"We are currently unable to make as many consoles as players want to buy, and we need a new business model and partnerships for hardware as we remain committed to Helix," Sharma wrote in the letter.

It'd be funnier that Microsoft is doing this to itself if it weren't screwing up everything else, too. Valve still hasn't told us what its new Steam Machines will cost, but it doesn't bode well that a 1TB Steam Deck now costs $950.

I have no doubt that PC gamers will find a way to keep doing what we do, but there may be a long cold winter ahead, so safeguard that DDR5.