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MS exec: Microsoft’s next console will play “Xbox and PC games”

Last summer, we here at Ars made the argument that the company’s next Xbox console should give up the walled garden approach and just run Windows already. Now, newly named Microsoft Executive Vice President for Gaming Asha Sharma has strongly hinted that this is indeed the direction Microsoft is going, saying its next-generation console will “play your Xbox and PC games.”

In a social media post Thursday afternoon, Sharma said that “our commitment to the return of Xbox” would include a new console codenamed Project Helix that “will lead in performance and play your Xbox and PC games.” Sharma said she would be discussing that commitment and that console itself with developers and partners at her first Game Developers Conference next week.

Sharma’s statement leaves a little wiggle room for Project Helix to be something other than a full-fledged Windows-based living room gaming box. The coming console’s access to PC games could be limited to Microsoft’s existing streaming solution via PC Game Pass, for instance, or to games designed for Microsoft’s own Xbox-branded PC SDK and the PC Xbox app.

Still, a plain reading of Sharma’s statement suggests that Microsoft is getting ready to open up its next console to a complete Windows installation, with the ability to play tens of thousands of existing PC games. That doesn’t come as a complete shock, considering that Microsoft already used the Xbox name for last year’s Windows-based ROG Xbox Ally (and its somewhat console-esque full-screen “Xbox Experience”). Microsoft has also been slowly reducing the number of games that are fully exclusive to Xbox consoles, lowering the value of a walled-off console platform (Sony, meanwhile, pulled back this week from its recent trend of releasing first-party titles on PC as well). Meanwhile, Valve’s coming Steam Machine is threatening to bring Windows-free PC gaming to living rooms everywhere in the near future.

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Bad news for Valve in particular?

On the surface, it might seem like every company making gaming hardware would be similarly affected by increasing component costs. In practice, though, analysts suggested that Valve might be in a uniquely bad position to absorb this ongoing market disruption.

Large console makers like Sony and Microsoft “can commit to tens of millions of orders, and have strong negotiating power,” Niko Partners analyst Daniel Ahmad pointed out. The Steam Machine, on the other hand, is “a niche product that cannot benefit in the same way when it comes to procurement,” meaning Valve has to shoulder higher component cost increases.

F-Squared’s Futter echoed that Valve is “not an enormous player in the hardware space, even with the Steam Deck’s success. So they likely don’t have the same kind of priority as a Nintendo, Sony, or Microsoft when it comes to suppliers.”

PlayStation 5 in horizontal orientation, compared to Xbox Series X in horizontal orientation — Sony and Microsoft might have an advantage when negotiating volume discounts with suppliers. Credit: Sam Machkovech

The size of the Steam Machine price adjustment also might depend on when Valve made its supply chain commitments. “It’s not clear when or if Valve locked in supply contracts for the Steam Machine, or if supply can be diverted from the Steam Deck for the new product,” Tech Insights analyst James Sanders noted. On the other hand, “Sony and Microsoft likely will have locked in more favorable component pricing before the current spike,” Van Dreunen said.

That said, some other aspects of the Steam Machine design could give Valve some greater pricing flexibility. Sanders noted that the Steam Machine’s smaller physical size could mean smaller packaging and reduced shipping costs for Valve. And selling the system primarily through direct sales via the web and Steam itself eliminates the usual retailer markups console makers have to take into account, he added.

“I think Valve was hoping for a much lower price and that the component issue would be short-term,” Cole said. “Obviously it is looking more like a long-term issue.”

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