Early this year I wrote about macroeconomic pressures freezing the console and PC gaming markets in place. It’s only gotten more challenging in the months since.
Thanks to tariffs and an AI boom that has increased demand for RAM and other hardware, a PS5 Digital now costs $600 USD, while an Xbox Series X costs $650. Closed ecosystems ensure expenses beyond the hardware aren’t getting any cheaper either. It costs at least $80 to $100 for a year of multiplayer access. Full price AAA games are considering $80 price tags.
Circana research from Mat Piscatella underlines how console gaming is increasingly a hobby for the rich. Back in Q1 2022, 40% of households that purchased new video game hardware made more than $100k, while 31% earned less than $50k. By Q4 2025, 53% made more than $100k annually, while just 19% made less than $50k.
Yet Microsoft and Sony are making a bad situation even worse. Both corporations seem to have no plan for the future beyond catering to an increasingly high income enthusiast base.
In March, Bloomberg’s Jason Schreier reported that PlayStation is pulling back from porting their first party games to PC. Pedigree titles like Ghosts of Yotei, Wolverine, and Intergalactic are staying exclusive to PS5.
More recently, new Xbox head Asha Sharma took several actions squarely aimed at their hard core fans. She shared an open letter on the platform’s future that opens with “Console is at the foundation” and has “Stabilize Gen9 as a healthy and high-quality base” as the first listed priority. She is “reevaluating” exclusivity and windowing — two subjects seemingly ended with past leadership. Xbox also ended their device agnostic “this is an Xbox” marketing push.
Admittedly, doubling down on consoles and exclusivity are a tried and true strategy. In a world upended by war and political uncertainty, I understand why Microsoft and Sony would like to roll back to clock to simpler times.
Yet today’s sobering environment reframes this “back to basics” approach as craven capitalist opportunism: Extract more from an enthusiast audience relatively insensitive to price increases. End gestures towards affordability and innovation. Give up on the casual market.
It’s a strategy that mirrors larger corporate trends we’re seeing in the larger “K-shaped economy”. The rich are seeing their incomes rise while lower-income individuals are struggling, and companies are tailoring their business in suit. For example, airlines are retrofitting their aircrafts with additional luxuries and perks for first class and premium customers, while cutting back on economy seats. Gaming companies are doing something similar, marketing $900 PS5 Pros and $100 “deluxe edition” games, while offering no current gen console below $500.
But gaming isn’t air travel. Chasing an aging enthusiast audience won’t make inroads with a younger generation. As the player base shrinks, sales of perennial franchises like Grand Theft Auto and NBA 2K will slow, putting the broader industry at financial risk. Many great long form games like Hades II or Resident Evil: Requiem exclusively available on consoles and PCs will go unplayed.
Even Nintendo, a company I associate with more price conscious, mass market gaming, is struggling with affordability. While last generation players could pick up a new Switch for as little as $200, the Switch 2 costs $450 and will increase to $500 on September 1st. That’s a dangerously large increase for Nintendo; a Switch 2 is now in the same price range as low end TVs, tablets, and smartphones.
Still, I remain bullish on some new device breaking through with a wider casual audience. It would have to be relatively inexpensive, yet still have enough power for modern console and PC games. Cloud streaming could see a major breakthrough, opening up cheaper tablets, TVs, and PCs as an entry point. Apple is also well positioned to disrupt the market given their massive existing user base and powerful hardware. If their interests in gaming extended past free to play mobile titles with big in app purchases, it could become a serious competitor. Alternatively one of the “big three” existing players — Microsoft, Nintendo, or Sony — could release more innovative hardware. A device could leaning on older internal parts and clever software upscaling or other tricks to bridge technical gaps to play modern games while remaining affordable.
Inevitably, these kinds of devices would be seen as a major risk by otherwise conservative corporations. But evolution is necessary. Macroeconomic pressures are real while endless digital entertainment options are weakening consoles’ cultural appeal. The market has to evolve beyond affluent enthusiasts or risk narrowing into a niche pursuit — the classical music or opera of the modern age.