My first reaction: The next Xbox is dead on arrival. It’s DOA.

My second thought: Microsoft knows people won’t pay that much. It couldn’t possibly charge that much money if it wants next gen to be a success. “I wouldn’t release it at all,” former Microsoft exec Mike Ybarra recently said.

My third thought: Didn’t Microsoft already say out loud that it knows people won’t pay that much?

Did Fortune get it wrong?

I don’t think Fortune’s insiders are the problem here. With today’s incredibly overpriced RAM and storage, it wouldn’t be surprising if it cost over a thousand dollars to build, package, distribute, and sell “the largest technical leap you will have ever seen in a hardware generation,” as former Xbox president Sarah Bond called the next Xbox back in 2024.

But there are at least five ways the report could be correct without making you pay all that money at once. I just don’t think you’re going to like most of them.

The least-likely possibility is the one Fortune suggests itself. Let’s look at the original quote, bolding mine:

Historically, Microsoft has subsidized the Xbox. Microsoft sold boxes at a loss right out of the gate, making its profits when you buy games and Xbox Game Pass subscriptions instead of on the hardware alone. That’s not our speculation — it’s exactly what Microsoft told The Verge in 2021. In 2023, we learned that Microsoft may have spent $1.5 billion to make sure it could sell the Xbox Series X and S at $499 and $299 respectively, instead of what they actually cost.

But Microsoft has suggested that it’s done with hardware subsidies. “Going forward, this cannot continue,” wrote Sharma in her “Xbox reset” memo, referring to the $20 billion in content, platform, and hardware subsidies Microsoft made over the past five years.

Microsoft CEO Satya Nadella echoed that idea on the Hard Fork podcast: “No one can accuse Microsoft of not having invested for the last 25 years, and now we have to turn this into a sustainable business.”

It isn’t just new management that’s hinting at no more subsidies: Bond primed the pump for a $1,000 box when she called Helix “a very premium, very high-end curated experience” late last year, comparing it to gaming PCs like the $1,000 Xbox Ally X handheld.

Perhaps Microsoft has changed its mind since then. “We are working very hard to rethink everything that we can about Helix,” Ball said in June, referring to affordability. “The plan’s the plan until it’s not the plan,” Sharma said in February (though not about affordability specifically).

But subsidies would be a tremendous risk if the Helix still plays PC games in addition to Xbox ones. Valve’s Steam is by far the dominant PC gaming platform — so PC gamers who buy a Helix won’t help Microsoft recoup its money.

There’s another way Microsoft could subsidize a $1,200 Xbox.

Today, AT&T will give you a $1,200 iPhone 18 Pro for $0* — if you lock yourself into 36 months of AT&T phone service that costs $100 or more per month and trade in a recent phone, too.

Microsoft could do the same with a new, pricier tier of its Xbox Game Pass game subscription service, effectively bundling the games with the console and making you slowly pay for both at the same time. Perhaps you’ll have the option to buy an “unlocked” Xbox for full price, but it won’t be the norm.

To make it happen directly, Microsoft would need a pricier new tier of Xbox Game Pass, which wouldn’t necessarily align with the company’s recent moves. Sharma actually cut the price of Game Pass Ultimate to $22.99 a month in April, writing that “Game Pass has become too expensive for players,” while removing Call of Duty games and unlimited access to Xbox Cloud Gaming from the deal.

I don’t know if it would work. People feel naked leaving the house without phone service. They might not feel the same about games. Subscription fatigue is real. But if it worked, Microsoft’s moat would be stronger than ever. You’ll be more likely to play the games you’ve already paid for and are committed to keep paying for. Many would get sucked into a profitable upgrade cycle, just like they do with phones, since they can buy the next Xbox for “$0” as soon as it comes out.

Cellphone subsidies have been around nearly as long as pricey phones: The 1994 IBM Simon, arguably the first smartphone, eventually cost half its $1,100 price tag if you signed a contract with BellSouth. My first phone, a Kyocera QCP-6035 with a built-in PalmPilot, was subsidized when it arrived in 2001. So it’s not exactly a “radical new business model,” but it would be new for game consoles.

It’s also possible that Microsoft simply doesn’t plan to sell a console to the masses anymore — it can sell an $1,800 Xbox to those who can afford “video game ownership” and try to hook everyone else on the Netflix model.

After all, the “K-shaped economy” and RAMageddon have already made gaming PCs and existing game consoles into luxury goods. Society’s wealthier individuals seem perfectly happy to pay inflated prices for the few consoles Sony and Microsoft still pump out.

“I can tell you definitively, demand for our console exceeds supply. We are putting them in as many stores as possible, we are producing them as quickly as possible. There is a severe limitation to how quickly we can do that,” Xbox chief strategy officer Matthew Ball told The Game Business in June, blaming RAM shortages.

But Microsoft has another way of giving less affluent people access to “next-gen” Xbox power. It can rent you one. The company just launched pay-as-you-go cloud gaming starting at $3.99 for 10 hours of cloud gaming (50 hours for $11.99).

Maybe all of Microsoft’s recent talk about affordability isn’t about the masses owning a next-gen console. Maybe it’s about finding an affordable way for people to “play Xbox” without owning the games at all.

After Fortune’s report, some of the very first reactions I saw boiled down to this: “I’m out. Forget next gen, I’m going to stick with my existing Xbox/PlayStation/Switch.”

That’ll be the reality for many people if the Xbox costs over a thousand bucks. But if the RAM shortage continues — if Microsoft knows it’ll sell every Xbox it can make to wealthy individuals because it can’t make a lot — it’s not necessarily a huge risk to sell it sky-high on day one.

Perhaps the Xbox Helix will be an early adopter console, the same way the iPhone Duo is an early adopter phone, the same way the Steam Frame is an early adopter headset. These products are selling out instantly despite their high price tags, leaving many would-be buyers in the cold. They’re shipping messy and unfinished, but that’s okay because early adopters want to come along for the ride.

Microsoft knows the same is true of some Xbox buyers, because it helped ship an unfinished $1,000 Xbox Ally X handheld even before the RAM crisis, and the $1,300 Xbox Ally X20 follow-up is already sold out.

But if Microsoft splits the Xbox audience into “have” and “have-not,” it means the next generation won’t truly arrive. Game developers won’t spend all their effort targeting a console people can’t buy. The next Xbox won’t be any more necessary than a PS5 Pro if you already own a PS5. In industry lingo, the Helix would be a “mid-cycle refresh” instead of true next gen.

I wouldn’t hate that, though, and neither would many video game execs. They’ve long complained that the pace of technology has ballooned the cost of building a video game to unsustainable levels, leading to today’s world where too many development teams are cut to the bone right after their games ship.

Former PlayStation and Xbox execs like Shuhei Yoshida, Shawn Layden, and Mike Ybarra have argued that the next gen isn’t necessary.

“Stick with PS5 Pro/Series X until prices normalize. The capabilities of those boxes are both fine for 99% of the audience. No one is screaming ‘I need a more powerful console’ right now,” Ybarra tweeted on October 20th.

“I think [Sony and Nintendo] should try to keep the current generation as long as possible, because I think people are very happy using PS5 and Switch 2,” Yoshida told me on The Vergecast.

“I think we’ve plateaued on the tech, frankly,” Layden told GamesIndustry.biz in 2025. (He’s said similar before and since.) “Make it cheaper and simpler. Let’s do that instead. And let’s find a way to have more hardware companies participate.”

Even if Microsoft ships a $1,800 console, the company’s been clear it won’t be the only Xbox you can buy. Sharma has publicly said that Helix will be a “family of devices,” which has been broadly interpreted to mean that Microsoft will let PC industry partners like Asus sell their own “Xbox” as well.

If the reporting pans out, that wouldn’t just be a cobranded Xbox Ally handheld that runs Windows — Asus could make a console-shaped box that runs a Windows-based Xbox OS, too.

Some of those partners could offer more affordable, less powerful Xboxes than Microsoft’s own flagship box, perhaps with less storage and memory. Microsoft, too, might have creative solutions for storage, like how the company shipped the Xbox 360 with different-size hard drives, or none at all, to make it more affordable. “We will have to empower customers to have very flexible storage offerings,” Sharma said in June.

Or you could buy another Xbox that’s likely going to continue to count as part of Microsoft’s “family”: the existing Xbox Series X and Xbox Series S.

This can all work because games don’t need to target a single console anymore; they haven’t needed to for a long time. An Xbox One game runs on an Xbox One X and an Xbox Series S and an Xbox Series X because they’re all effectively AMD-powered Windows PCs, just with different amounts of performance on tap. The Xbox Helix is a powerful extension of the same continuum. The same is true of PlayStation 4, PS4 Pro, PS5, PS5 Pro, and presumably PS6, minus the Windows part.

Perhaps a particular piece of hardware will stand out as the one developers should target as the baseline for “it looks and runs great on Xbox,” the same way the Steam Deck handheld became a baseline for PC game developers starting in 2022. Maybe, like the Steam Deck and the Nintendo Switch, it’ll help reset our expectations of what a top-shelf game needs to look like.

At this rate, I wouldn’t be surprised if the existing Xbox Series S will be the one. But it could also be Microsoft’s own next handheld Xbox. Fortune’s insiders say it’s coming holiday 2027.