Microsoft’s new Xbox CEO Asha Sharma has signalled a major reset for the gaming business, saying the company must prioritise lower hardware costs, new business models and exclusive content rather than chasing ultra-premium console performance.

Speaking after her first 100 days in the role, Sharma said the console market had reached a point where it was unrealistic to expect mainstream consumers to spend “thousands of dollars” on a new console generation.

“We must think about the cost construction of consoles and how we create different plans, partnerships that will allow us to have better distribution,” Sharma said.

She added that Xbox would continue to explore “new business models” rather than focusing only on building “the most premium, high-performance console in the world”.

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The comments come as Xbox faces mounting pressure inside Microsoft.

In a public memo to staff, Sharma and Xbox chief content officer Matt Booty said the business was expected to finish the fiscal year with an accountability margin of about 3%, down year-on-year.

The memo said that, excluding Activision Blizzard King, Xbox had spent more than US$20 billion over five years on content, platforms and hardware subsidies, while annual revenue had fallen by almost US$500 million.

“Going forward, this cannot continue,” the executives wrote.

Sharma also recently said recent Xbox Game Pass price cuts are already paying off, with subscriber acquisitions growing and retention improving after the service was hit by earlier price rises and tier changes.

Xbox is also facing a hardware component crisis. Sharma warned that console storage costs had more than doubled since late last year and could rise to more than five times 2024 levels by the 2027 holiday season.

Despite the pressure, Microsoft remains committed to its next-generation Xbox project, codenamed Helix.

However, Sharma said the company needed new hardware partnerships and a different commercial model.

Xbox is also moving back toward exclusives, confirming Gears of War: E-Day and Clockwork Revolution as platform exclusives.

Sharma said one or two “signature exclusives” would be introduced as the business stabilised.

The reset comes amid reports that significant Xbox layoffs could begin in July, after Microsoft’s fiscal year closes on June 30.