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.
With the console and gaming PC market at a standstill, gaming is facing one of its largest crises in a decade. Momentum the medium took for granted — new console generations, affordable hardware upgrades, and a growing player base — has hit a wall. The ripple effects could be devastating, leading to more layoffs and shuttered studios.
But before we can look ahead, we need to understand how we got here. Gradual shifts in demand over the last decade set the stage, and economic supply shocks locked them in place.
The first signs of a major shakeup appeared around 2018 with Fortnite’s massive success. The free to play “game as a service” (GAAS) drew massive player growth and revenues that rapidly outpaced full priced games from similar genres. Other GAAS like Roblox and Minecraft followed similar trajectories around the same period.
It’s exciting to see that most of my favorite games of the year came from smaller studios willing to take big risks with story and gameplay. They offer an essential counterbalance to tired franchises that rely on micro transactions and familiarity to stay relevant.
Yet as great as it was to play such creatively daring output, it was an especially tough year for the industry. Widespread layoffs, corporate consolidation, and rising costs from tariffs and AI have many questioning gaming’s sustainability heading into 2026. And as bleak the state of gaming was, the world beyond it often felt worse. Amidst an otherwise gloomy news year, I take comfort in several great selections that should stand the test of time.
Xbox has had a rough year. Leadership has flip-flopped on exclusives, shut down multiple first party studios, carried out mass layoffs, and cancelled multiple games. It’s also facing active BDS boycott due to Microsoft’s ties to the Israeli military. But simple economics may be Xbox’s undoing. The aggressive price increases on Xbox hardware and subscription services have made the broader Xbox ecosystem — Game Pass, Series consoles, ROG Ally handhelds, and the Microsoft Store — increasingly unappealing.
Xbox products are simply too expensive. An Xbox Series X in the US costs $100 more than a PS5 and $200 more than a Switch 2. The upcoming Xbox co-branded ROG Ally X sells for $999, roughly double the price of the market-leading Steam Deck. That’s a problem when Xbox has a smaller game library and customer base than Steam, PlayStation, and Nintendo.
Even with those disadvantages, Xbox’s primary selling point has been their game subscription service Game Pass Ultimate (GPU). While rival services from Nintendo, Sony, mainly feature older games, GPU offers many big budget PC and console titles, including all of Microsoft’s first party lineup, on day one. But GPU now costs a prohibitive $30 per month. That’s the same cost as five full price games over a year, a steep ask when most gamers spend far less on their hobby.
Imagine a small box running SteamOS that easily pairs with a TV or monitor. It would be more powerful than a Switch 2 but cost under $400. This kind of hardware flopped a decade ago, but today it could attract a large audience. Against a gaming industry that faces widespread challenges, Valve stands out as one of the few companies to potentially disrupt the market with small form factor PCs. Sony and Nintendo wouldn’t face immediate threats from such a device. But the strengths of this Valve branded hardware — lets call it the Steam Machine 2 (SM2) — would be hard to beat. The SM2’s simplicity, breadth, and price would be virtually unrivaled.
This hardware would offer a largely console-like experience out of the box, refined through years of SteamOS iterations on the Steam Deck. Players would also get access to the largest, most diverse gaming library available. Steam’s catalog is practically endless, including longstanding franchise hits, indie viral streaming sensations, and most of Sony’s and Microsoft’s first party titles.
The SM2 would also be comparatively affordable. The hardware would be cheaper than a Switch 2 or PS5, without multiplayer access fees in the form of a PlayStation Plus or Xbox Game Pass. Unlike games sold on console or physical marketplaces, most Steam games go on deep discount several times a year.
After experiencing two seasons of TV and thirty hours of gameplay, it’s clear The Last of Us delivers an uneven, hit-or-miss experience. Characters are a strong suit, thanks to impeccable casting by HBO and Naughty Dog plus universally solid acting. However, part II of TLOU — The Last of Us Part II (TLOU2) game and the show after season one — suffers from serious flaws. It feels overstuffed, flattens characterization, and struggles with its darker thematic elements. What begins as an engrossing two-hander with a smart moral dilemma devolves into cruel, anonymous “cycle of violence” genre fodder. (Major spoilers for TLOU ahead.)
Part II’s biggest problem lies in how its main characters — Ellie, Dina, and Abby — feel severely underwritten compared to Joel and Ellie in part I. Character arcs are practically nonexistent. The story skips over reflection and introspection about the impact of these characters’ revenge-fueled warpaths. When such moments do appear, they feel merely perfunctory.
The future of Xbox depends more on its software than its hardware. A strong update of Xbox’s Windows-based gaming app — let’s call it “XboxOS” — is essential for the Xbox brand to survive beyond its massive game publishing reach.
This is a sobering reality that contradicts many recent hardware-specific rumors. Microsoft could make the smartest handheld or console ever, but it will likely appeal only to a small segment of core enthusiasts. The main problem is shrinking market share. Xbox Series S and X sales are declining rapidly. The upcoming Switch 2 will only accelerate Microsoft’s hardware losses. Many previously loyal Xbox customers have already shifted to PC or PS5. History shows that third or fourth place hardware ecosystems rarely rebound in sales.
Additionally, because Microsoft can’t rely on the same volume of sales as Sony or Nintendo, which means the company likely has to seek higher profit margins per device. This suggests Microsoft hardware will cost more than a potentially than similarly powered alternatives. I expect any next-generation hardware will be more of an experiment for Microsoft — effectively a Surface device for gamers.
Although I’ve played video games for decades, I’ve rarely been as down on the hobby as I have in recent years. Critically acclaimed titles such as Metaphor: ReFantazio require more time than my lifestyle permits. Many small indie games I appreciate like Dungeons of Hinterberg come and go without sufficient recognition. Conversely, big budget releases often stick to safe formulas, leading to underwhelming gameplay.
But over the past month, Indiana Jones and the Great Circle and Citizen Sleeper 2: Starward Vector have rekindled my optimism. Despite differences in budget, genre, and creative intent, both games are exceptionally well crafted narrative experiences.
At first glance, Indiana Jones follows a familiar AAA adventure template: high quality motion capture, lush soundtracks, expansive locations, and detailed production design that suggests Machine Games spent extensive time and budget on their game. I anticipated gameplay similar to The Last of Us (linear stealth action) or Machine Games’ own Wolfenstein reboot (guns blazing shooter).
But after a few hours of playtime, it’s apparent how Indiana Jones employs a novel approach to its mechanics and story pacing. There’s far less combat than I originally expected, almost all of which leans on avoidance and stealth based melee attacks (Indy can only take a few hits before going down.) Gunplay is usually a choice of last resort. Most gameplay takes place on large maps that allow for open ended exploration, supplemented by a variety of puzzle and platforming challenges. Unlike many adventure games that save their high quality video cutscenes for level transitions, Indiana Jones integrates them more democratically, including a refreshing amount of cutscenes for side missions.
I’ve written here about film’s changing cultural cache and the evolution of what it means to be a devoted cineaste in 2025. But the subject extends far beyond film. In the on-demand attention era, with its endless variety of entertainment, audiences are fragmenting, widening the gap between casual fans and hardcore enthusiasts.
To predict the future of any media form — TV, gaming, music, movies — one must examine what’s most convenient for the casual audience to adopt, along with the depth and availability of content available for enthusiasts. (I hesitate to use the word ‘content’ given its tendency to devalue or anonymize artistry, but it’s the most concise way to describe such a wide variety of entertainment.)
Let’s break this logic down further. Time and money have always distinguished newcomers from superfans, from NFL football to indie horror movies. Someone dabbling with dance pop listens occasionally to Charlie XCX on a mixed playlist, while the obsessive house head buys a crate of DJ sets on vinyl.
It’s unsurprising to see Xbox fully embrace a multi-platform strategy. Lagging behind Sony and Nintendo in hardware sales and user base, Microsoft can ensure far larger revenue streams by porting its first party games to PS5 and Switch. It’s a strategy that reflects broader industry trends, as escalating development costs and a stagnating console market push publishers like Square Enix and even PlayStation away from long term exclusivity.
However, Microsoft’s Xbox ecosystem — comprising Xbox hardware, Game Pass, and the Windows PC Xbox app — is where they generate maximal revenue and retain full editorial control. Intra ecosystem Xbox keeps the full share of revenue from their own products, while taking a 30% cut from every non-Microsoft purchase. It’s also for now the only space where Microsoft can sell Game Pass and have the technical leverage to integrate a cloud centric, cross platform solution to suit their needs.
Yet the Xbox ecosystem itself feels increasingly under threat. Game Pass subscribers have plateaued, and Xbox Series S and X hardware sales are dropping precipitously.