Microsoft has announced that it is increasing the price of Xbox worldwide from August 2, blaming increased costs for console storage and memory. The 512 GB models will increase by $100 and the 1TB model will increase by $150; the 2TB variant will be withdrawn. The company did not immediately confirm pricing for non-US markets.

In a blog post, the company referred to its previous price increase in October and said that while it had hoped another price increase would not be necessary, "console storage and memory prices have increased by more than 2.5x and we expect another doubling by the fall of 2027. The entire consumer electronics industry is struggling with the current components crisis, but the effects are particularly hard on consoles."

"Unlike phones, computers, speakers, and other consumer devices, consoles are typically not sold at a profit, but instead for less than they cost to make."

In the announcement the company highlighted "programs to make Xbox consoles more accessible", including a buy now, pay later option for purchases through the Microsoft Store, interest free financing through Amazon, and "working with retail partners on new programs to provide previously played consoles at lower prices." It also pointed out that "Certified Refurbished Consoles are available at Microsoft Stores for up to US$100 off MSRP."

The base version of the Steam Machine starts at $1,049.

"The big, number one factor in cost is the components that make up the device, and you know, the cost of making it and shipping it and distributing it, etc. etc.," Aldehayyat said. "I mean, as we said before, I think we really wanted the Steam Machine to be a good entry-level PC. I think we mentioned that in November, and we want it to be affordable for as many people as possible. It's definitely more expensive than we hoped."

Asked whether the price on Steam Machine could come down when component pricing reduces, Valve is non-committal.

"It's too dangerous for us to speculate right now," Aldehayyat said.

"I would say, like, anything we say now is probably gonna be unfortunate statements in the future, but I think we just have to wait and see what the market does, because I don't think anybody right now is able to predict what's going to happen in the future, so we'd like to refrain from trying to make predictions that are difficult to make right now."

Designer Lawrence Yang added: "Suffice to say, at least at this moment, component prices are too high, and components themselves are too rare, to make what we want, at the price that we want, when we want to. And I think it's something that's shared by everyone in this industry right now."

Yesterday, Valve finally revealed the launch price for its hotly anticipated Steam Machine console/PC hybrid. Prices will start at $1,049 for a 515GB without a controller, and go up to $1,428 for a 2TB machine with a controller.

These prices are far higher than Valve wanted them to be. Back in February, the company pushed back the launch of the Steam Machine as a result of memory shortages, and Valve has said that the initial batch of Steam Machines will only be available in limited quantities. Across the industry, the generative AI boom is having a seismic impact on component prices and supplies, and the Steam Machine price reveal is the latest evidence of the cost to consumers.

Although the Steam Machine is a PC at heart, it's a console in form, and going beyond the $1,000 mark is, for many, breaking a psychological barrier in terms of what consoles should cost. But what effect will the pricing have on sales? What are the implications for the upcoming consoles from Sony and Microsoft? And what does this tell us about the market more generally?

Van Dreunen says that he wasn't shocked at all to see Valve breaking the $1,000 barrier. "In fact, I predicted in March that we'd see the price of gaming consoles breach $1,000," he says. "If anything, I underestimated the speed: even in my most pessimistic February revision, I had the top SKU near $899, and the entry price alone cleared that. It's disappointing, certainly, because Valve prides itself on accessibility and fair pricing for consumers. But unless Valve is willing to heavily subsidize its upcoming device, it has to price in the runaway cost of memory and storage like everyone else."

Likewise, Rosier wasn't surprised about Valve's pricing. "The $1,049 entry price tracks the current component market, rather than any positioning choice," he says. "Valve set the 512GB model at $1,049, just above a clean $999. Combined with its public line that the original target is 'no longer viable', that points to minimal-margin pricing, not a marketing number. From Valve's own statements and the reporting around launch, the price came in well above the $700 to $800 band Valve had originally targeted. Valve attributes the gap to higher DRAM and NAND costs as AI data-centre demand absorbs supply."

In short, he says, "Valve is not subsidizing the hardware. Platform holders routinely sell consoles at or below build cost and recover margin on software and services. Valve's hardware has historically carried thin margins, with the business resting on Steam software and service revenue."

Steam has announced pricing and extremely limited availability for the Steam Machine, the desktop/living room sibling of the successful Steam Deck. It will be available in 512GB and 2TB versions, priced at $1,049 USD / £879 GBP and $1,349 USD / £1,149 GBP, and availability will be determined by a lottery system that opens today.

Early reviews from critics have been positive, citing the design and form factor as particular highlights, although reviewers said the price meant it was not as competitive with PS5 and Xbox Series consoles as some had hoped.

Users who wish to purchase can register today on the Valve website, with a deadline of June 25 at 10am Pacific time. At that point Valve will run a randomised lottery to assign places in a reservation queue, which it described as "an effort to improve the purchase experience and limit resellers."

"As units become available, people in the reservation queue will receive an email with the option to purchase," the firm said in an FAQ. "We'll send the first batch of those starting Monday June 29th, and intend to get through the queue by the end of the year."

The firm said that its original target price was "no longer viable" due to hardware pricing and availability, and the RRP "reflects the price of the components as we've secured them over the past 6 months." It said that availability was also severely constrained, to the point where it "couldn't source some of our components at all, at any price." RAM and storage costs have rocketed in recent months as AI hyperscalers buy out available supply.

The firm had previously said that pricing would be "pretty competitive" with equivalent PCs. Observers had initially expected the Steam Machine to be a strong competitor for the console market in general and Microsoft in particular, combining the lightweight Linux-based SteamOS with a desktop platform that supports a 20-plus-year old Steam library.

Unreal Engine 6

Epic said the next generation of its game development engine will take the AAA game development capabilities from UE5 and "expand them with a next-generation game development pipeline" it has been building live within Fortnite.

The company said it aims to enable developers to create games of "any scale and scope once and deploy to traditional platforms, Fortnite, or their own live and potentially multi-product ecosystems."

UE6 will be built with three major initiatives:

Moving the gameplay programming model to Verse, which transactionalizes C++, for increased accessibility of development and so that it can build persistent, large-scale, live experiences with thousands of contributors.
Enabling content, code, and economies to become portable and interoperable across games, ecosystems, and engines through open standards, to enable developer collaboration on much greater scales than ever before.
Building development pipeline features – such as a Model Context Protocol (MCP) with integrations for Claude, Gemini, and others – as creativity and productivity multipliers so that teams can focus their efforts on the essential creative and technical tasks of development rather than on time-consuming manual tasks.
Epic says it's targeting an early access release by the end of 2027.

Many features are now Production Ready in UE 5.8, including MegaLights, Audio Insights, Dataflow for Chaos Cloth, Live Link Hub, Iris, and Movie Render Graph. Mesh Terrain, a brand-new experimental system for authoring "complex 3D landscapes in any kind of environment without the limitations of heightfields," is also available.

Shader compilation has been optimized, along with improved deduplication, which Epic said "helped cut Fortnite's shader count by 68%."

"Lumen now features lightweight dynamic global illumination to support 60 fps on Nintendo Switch 2 and PCs," the company said. "And we've continued to expand worldbuilding capabilities and make character and animation workflows more interactive and intuitive."

Unreal Engine 5.8 also introduces a new Experimental Model Context Protocol (MCP) plugin, which enables developers to "connect models like Claude directly to UE projects."

"Rather than acting as assistants that simply copy and paste, these models can become active collaborators that understand and operate within specific Unreal Engine workflows," the company explained. "The interface is open, and so is the choice of model: build with Claude, Gemini, or whichever models best fit your needs."

New media and entertainment workflows now give artists "far greater creative control" over image and video generation than traditional text-prompt tools.

"Bringing diffusion models into Unreal Engine opens up the ability to use depth passes, normal maps, and camera data from 3D scenes as conditioning inputs alongside text prompts," Epic wrote. "The results are styled frames that respect camera framing and scene layout, extract and mesh segmented objects into reusable 3D assets, and render full video sequences with model-guided diffusion – all from within the engine."

Unreal Engine 5.8 is the "last planned major release" for Unreal Engine, although Epic stresses that it's "reserving the option to release a 5.9, if needed."