The Gaming Market Is Starting to Break

[00:01] 2020 at $399. And now, even though it's 6 years old, it costs $599. Nintendo's too. The Xbox has raised its price three times since 2025. And the scariest part

[00:14] is not even the extra money. It's what's happening around it. Because at the same to stop shipping physical game discs entirely. Xbox has axed five of its big thousands of people in what's being called one of the biggest single layoffs

[00:29] in gaming history. All while Nvidia has started capping how many hours a month you're allowed to play when using their services. The craziest part, everything I've just mentioned is linked. This is actually all part of a single chain

[00:41] reaction that's already started in the gaming industry and I don't see where it gaming industry and I don't see where it stops. take apart this PlayStation 5, inside you would find 16 GB of RAM or

[00:58] memory, which it needs to be able to run games. A single AI chip from Nvidia, the games. A single AI chip from Nvidia, the Blackwell Ultra, requires 288 GB of memory. 18 PlayStation 5's worth of RAM. Now, it is a fancier type of memory than

[01:11] made on the same production lines by the same companies. So every gigabyte that goes into this is a gigabyte that can't be made for a PS5. [music] And the problem is when AI companies buy chips for their data centers, they don't just

[01:25] buy one. Chips are sold in racks, [music] each containing 72 of those AI chips. So one rack equals 1,300 PlayStation Fives. Oh dear. And they

[01:37] don't just buy one rack. Racks are purchased in clusters. Last year, Microsoft switched on their first big cluster to help power the growing needs from OpenAI's Chat GBT models. That cluster was 64 racks in one go, 83,000

[01:53] PlayStation Vives. And here's where it gets truly terrifying. Even that was barely a test run compared to the scale on which these new servers are being set up now, just a year later. OpenAI is currently building out the Stargate

[02:06] campus that will reportedly hold 100 times the number of racks as that first times the number of racks as that first purchase. 8.3 million PlayStation 5's worth of memory in one company's one site. That's almost enough PlayStations

[02:20] for every single household in the entire continent of Australia. And so when you factor in that there are also other AI companies, Meta and their even larger Prometheus site, XAI's Colossus, supposedly the world's most powerful

[02:33] data center of Amazon, Google, and every other big tech company who's galloping head first into the AI wars. We have reached a point where AI data centers are now estimated to be swallowing up 70% of the world's memory output. 70% is

[02:48] going into building services that we'd barely heard of 5 years ago. And that has left everything else on the planet that needs memory. Every phone, every PC, every car, every console having to now fight over the small and rapidly

[03:01] now fight over the small and rapidly shrinking pool that's left. memory, you ask? Well, I don't think they want to. See, the entire world's memory supply comes from largely five companies. And if we're talking about

[03:16] the specific type of memory used to make RAM, that's only three companies. Samsung, SKH Highix, and Micron. And these three companies could choose to invest tens of billions into new factories to be able to produce more,

[03:28] to build. And if there were to be an AI crash in that time, they'd have spent it all for nothing. And so, why take the risk when they're currently raking in cash? These companies are currently lapping up 70 to 80% margins on their

[03:41] memory compared to the historical norm of 30 to 40% because of one simple fact that their new favorite customers big tech companies will pay absolutely anything for it. We are in a very unique situation where basically for the first

[03:56] time since the.com bubble some of the richest companies on the planet like Microsoft, Amazon, Google are not even behaving like businesses. They're making from AI because the fear of losing the AI race has actually become

[04:10] bigger than the fear of debt. This is a very precarious situation for the world to be in. And it puts these memory companies in such a powerful position that it feels like they've just decided to forget entirely about the consumer

[04:22] with Micron actually quietly shutting down its consumer memory brand. Crucial to focus on these data center business customers. Now, new factories are coming. Elon Musk and Intel are building a giant AI complex in Texas, for

[04:34] memory. But none of it produces [music] anything meaningful before 2028. Plus, almost all of that new capacity is being built for, you guessed it, the AI customers anyway, because well, you already know now. So, how much more

[04:48] expensive has this memory really become? Well, to give you an idea, within just 3 months at the end of last year, the price of a single 16 GB stick of RAM rose almost 300%. According to Tom's Hardware's RAM price index, Asha Sharma,

[05:02] CEO of Xbox, has said the price we paid for console storage components was over two times as high as we paid last fall. These costs have since doubled again. And as we plan for the 2027 holiday season, we expect another significant

[05:14] increase, taking us over five times the prices we paid only 2 years earlier. Five times. Memory is getting so expensive that according to a report graphics cards, the memory that's on the card, known as the VRAM, now accounts

[05:28] for up to 80% of the total cost. Let that sink in. The actual clever bit of paying for, the GPU chip that companies like Nvidia spend billions designing, is on some cards now costing less than the basic memory that's soldered around it.

[05:48] problematic. The implications from these higher prices are bigger than they first seem because when the prices go up, of course, fewer consumers buy. Like if we just after the price hike, Americans

[06:02] bought fewer PlayStations than they had in any May since the year 2000. That's before the PlayStation 2 had even come to America. Xbox had the worst May in its entire history. And it's much bigger than just PlayStation and Xbox. any

[06:16] hardware. I was speaking to the director companies, the companies that make this kind of stuff. And his words were, "Man, Windows gaming handhelds and computers are dead now. No company will launch new

[06:29] products if the memory prices continue to rise. It is crazy now. How bad do things need to be for a director of a currently operating business to call their own business dead?" Even like Valve, typically the strongman of value

[06:42] gaming, just launched their Steam Machine, a box that's barely as powerful Machine, a box that's barely as powerful as the 6-year-old PS5 for $1,049. Deck, put it that way. So, all of a sudden, the home console, the bastion

[06:54] that for 30 years has been the affordable way to game, the thing your mom could buy you at Christmas, is quietly drifting away from a staple to a quietly drifting away from a staple to a luxury purchase.

[07:09] games, right? But are they going to have to start changing where they play them? Very possibly. And that's where things get concerning. If the PlayStation 6, for example, launches at 2 and 1/2 times the base price that the PS5 did, $1,000,

[07:23] which sounds like an outrageous prediction, but is actually what the current latest rumors are suggesting. Then it's not a crazy thought that far fewer people are going to buy a PS6. And you might think, okay, I mean, that's

[07:35] fine. I'll just wait. I'll buy it pre-owned. But [music] it's not about just us, the individual. See, the entire console gaming industry relies on momentum. These companies have to sell tens of millions of these consoles right

[07:47] out the gate to prove to developers that their new platform is worth developing for. It means that a new console is basically either all or nothing. You either sell tons of boxes, have developers flooding to your platform to

[07:59] even more users buying your console because of those games. The Nintendo Wii like this with the console eventually hitting 101 million sales or you bottle

[08:11] that initial launch trajectory. Game devs don't want to take the risk and then pretty much nothing you do is going to save your platform like the Wii U which came just after the Wii and in its [music] entire lifetime has only hit

[08:25] 13.5 million. So, my question is, how on earth are Sony or Xbox going to build any kind of momentum with their nextG consoles if they're priced at $1,000? If the PS6 launches and only 5 to 8 million people buy one in the first year,

[08:40] whereas 80 million people are currently on PS5s, which platform are developers going to prioritize their games for? Obviously, the old one. Sure, they'll resolution for the latest hardware. But any sensible developer who's going to

[08:53] have to spend maybe half a decade pouring everything into their next game is going to do everything to make sure that it's PS5 users who are getting an the money is. So now there is even less reason to upgrade and the spiral

[09:07] descends. Because here's the thing, Sony more so than Xbox is a little bit protected in the short term. If no one buys a PS6, then they do still have this giant PS5 install base to sell subscriptions and games to. But the

[09:20] install base of a console is like a melting ice cube. Consoles break, they get sold, they get retired, and players do slowly lose attachment and stop buying games for it across its lifetime. They drift over to PC, phones, or just

[09:34] that replenishes this pool of active users [music] is the nextG console. So, if the PS6 ends up too expensive to do that, then the paying population for companies like Sony is going to shrink every year with nothing refilling it.

[09:54] to maintain their profits, they have to claw back money from other places. And as far as I can see, there are four ways that they could do this. The first lever these companies will raise the price of subscriptions and will make it feel more

[10:07] essential to pay a monthly fee to get the experience. I mean, Xbox tried an last year to its Game Pass, then realized they went a little too far and more expensive than it was. And Nintendo's already started jacking up

[10:20] online costs 2 months ago in Japan. So, who knows how long till that becomes global. Lever 2 is game prices, and we've already been seeing a lot of this before the memory crisis. like $60 was the default price for a game for 15

[10:33] years. Then it jumped to $70 in 2020 only to now start another jump to $80 just 5 years after. If things carry on like this, we might be seeing the $100 video game sooner than we'd like to. The third lever is control. This is what

[10:48] announcing that from 2028 onwards, distribution of physical discs. And this might seem completely unrelated to what's happening here, but the key thing that this move achieves for Sony is

[11:00] rerooting a lot of the money in the gaming market that wasn't previously going to them back to them. Because it means that you can't sell your games anymore. When games are digital, they are tied to your account, effectively

[11:12] market. It means that if your friend wants to play the same game you're They can't just pop over to eBay and grab it for $20. they have to make an entirely new, maybe $80, maybe $100 purchase direct to Sony. And if that

[11:28] look at this. On my PlayStation right now, if I want to buy, say, Immortals of Avian, a game that, safe to say, flopped pretty hard, Sony is currently selling pretty hard, Sony is currently selling that for £69.99.

[11:41] That exact same game I can pop onto my phone, go on to CEX, and order the phone, go on to CEX, and order the physical edition for £5. It is crazy could just disappear. And crazier still that this is how Sony prices games while

[11:56] are they going to do when there's no other option? To clarify, when Sony access the discs, you will still be able to buy their games at other retailers. that still has to go through the PlayStation store to get you the games.

[12:09] >> I don't know what I expected. >> So Sony will control the price more so discs. I wouldn't go as far as to say that Sony axed the disc because of AI, but I do think that Sony axing discs is a sign of a squeezed, desperate

[12:23] industry, and that squeeze is largely brought on by this AI boom. And even if these discs don't officially die till 2028, it feels like the beginning of the end is now with GTA 6, maybe the biggest game launch in history, but the only

[12:37] physical thing about the physical edition is a download code, at which point they might as well just be digital only. And Nintendo, too. Because their game cartridges rely on the same type of

[12:50] flash memory that's rocking up in price. Publishers on Switch 2 are increasingly shipping datalless game key cards. Like Elden Ring, it's a cartridge in a box that doesn't actually have the game on the cartridge, just a key that downloads

[13:03] one who has to download it, and you're the one using up your internal storage that these companies can use to recoup their costs, the darkest one I'm getting to. But for the time being, can you see how it's already getting more expensive

[13:18] and just worse to be a console gamer? This is even leading to some insiders claiming that while Sony originally planned to launch PS6 in 2027, that it has now been delayed to 2028 or later. And whichever way this turns out, there

[13:31] is absolutely no doubt that we're about to see slower progress in games becoming supposedly leakly claiming that the nextG consoles will ship with less RAM speed bandwidth. As if there weren't already enough reasons to be concerned

[13:47] about them. I was originally wondering, one upside of AI is that maybe you don't need that new hardware. We've already seen with Nvidia's DLSS5 tech that AI has the ability to massively upscale the resolution of games, make them run

[13:59] smoother, and even improve the lighting in real time. But alas, most of this tech can only run on new compatible AI hardware, which the current gen consoles hardware, which the current gen consoles are just not.

[14:17] losing out in this spiral because the final lever that brands like Sony and Xbox are going to have to pull is cost cutting. Like I mentioned, Xbox has actually divested five big game studios, including the people behind massively

[14:30] popular titles like Hellblade and Psychonauts, and in the process also axed around 3,200 jobs. This is one company's one set of jobs. This is one company's one set of layoffs. And still, it means 3,200

[14:43] potentially talented level designers, graphic designers, voiceover artists who were previously working on the next generation of games who there's a very good chance are just not anymore. key word talented. Reportedly, the layoffs

[14:56] even include around half of the team at ID Software, the studio that basically invented the first person shooter with Doom, Quake, Wolfenstein, and more. Now, imagine if on top of everything else, the higher prices, the dirtier tactics,

[15:10] the reduced focus on next generation, that we also start getting fewer big budget games, too, because there's fewer people to make them. From an industry trade analysis in May 2026, a higher hardware entry price changes the shape

[15:22] of the next install-based cohort and feeds directly into the lifetime value assumptions that justify a green light decision at the publisher level. Or in English, publishers decide whether to make a game based on projections of how

[15:36] many consoles are going to exist in the future to sell it to. This memory price surge has reduced the future projected install base, which means that games are being killed at the pitch stage right now because of RAM prices, and we're not

[15:50] I think there's a very good chance that this also affects the innovation in games because doing new things is a risk. When projected install bases shrink, it means that the threshold for something to become green lit is going

[16:04] make it through that are increasingly going to be those easy, safe wins. Games like the new Assassin's Creed Black Flag Reynct, a beloved 13-year-old game that's been rebuilt cheaply, targeted at hardware people already own, and

[16:18] absolutely filled to the brim with in-game monetization. Or for another example, Jason Shrier recently reported that Obsidian, one of the other top game devs, they're ending work on a new unannounced RPG game to work on the next

[16:31] iteration of Fallout, the safe known entity. These are dark times for video games. I mean, EA is even going all out right now on trying to create a new standard for how in-game advertising works. And they're not scaling them

[16:43] platform that would let advertisers in almost real time buy ads that will then appear onto billboards and objects that you will see while trying to play your games. Now, you would hope that there will be limitations on what can be

[16:57] advertised where, but I am horrified by the idea of dropping the big bucks on Ghosts of Yote, being kneede in feudal Japan, katana drawn, cherry blossoms falling, only to turn around and see a giant sign for car insurance discounts.

[17:10] And even if it doesn't go that far, think about it. As soon as there becomes a monetary incentive to show game as adverts, how could that not start to change how game worlds are designed and even what types of games are made and

[17:22] how permanently online they need to be connected talked about game publishers getting greedier, the layoffs has been happening

[17:34] already in the background for years. I mean, especially after co when companies realized that they couldn't sustain the revenues that they had when all we were games. So, they've been finding all sorts of ways to recoup those costs both

[17:47] in-game and also by culling employees. >> You're fired. >> Point being, the fire was already lit. But the AI crisis stacked on top of this already strained industry is like the fire brigade showing up with cans of

[18:00] petrol. The problems are now accelerating so fast that yes, there's still a possibility that the memory crisis suddenly starts to ease. I hope it does. It is possible that this AI bubble that some people are calling it

[18:12] does just pop entirely. But the worrying thing is if they don't, how much more can console and game prices keep going up and demand keep going down before this entire business model for a game's console as we know it becomes unviable?

[18:28] I don't think very long at all. If the AI industry carries on doing what it's doing, then there's one of three things I could see happening, and I don't [music] think any of them are good news. One, cloud gaming, like Nvidia's GeForce

[18:40] Now, becoming a more popular alternative, so that Nvidia can rent us the graphics card we can no longer afford to buy and own, and we can stream games from their servers for a monthly fee forever. [music] And this isn't

[18:52] conjecture. The service is growing, racking up 30 million registered users with industry analysis actually citing the hardware scarcity from this memory crisis as one of the big three drivers of that. 30 million is a huge amount of

[19:06] but that's basically the same number of people that have bought the current gen Xbox Series S and X combined. And what makes this so depressing that it's almost funny, Nvidia just this January

[19:19] has enforced a 100h hour a month playtime cap on paid GeForce Now affect every user, but it paints quite the picture of what the world could look like when you don't own your hardware. The second thing I could see happening

[19:33] is older classic games becoming not just something that you revisit because you fancy a bit of nostalgia, but something that you settle for because it's a whole started to see this on PC where the majority of all PC play time now goes

[19:47] towards games that are over 6 years old. And a recent survey from Tom's Hardware, a publication that's only really going to be read by PC enthusiasts, finding that 60% of their readers won't be upgrading any hardware for at least the

[19:59] next 2 years. And then the third situation is mobile gaming becoming more of a default. See, all tech is getting more expensive, right? PCs, consoles, people are still going to buy a smartphone because it's considered much

[20:13] console. So if the user base of the smartphone remains steady and if anything continues to rise while the pool of people who can keep up with the increasing costs and difficulties of being a console or PC gamer falls, of

[20:26] developers are much more incentivized to put their eggs into the mobile [music] basket. Am I happy about that? Hell no. Console games are held to a certain standard that mobile games just aren't. And it's not like you can just make

[20:39] mobile. This has been tested time and time again. Resident Evil 4, Death Stranding, Assassin's Creed Mirage, and commercially they largely flocked. They cost near console money and barely anyone bought them because mobile gaming

[20:53] rewards freetoplay battle passes and in-game currencies and adverts. not your favorite console game, but smaller on a phone. It's this entire

[21:08] industry where the only economically sane thing for a game dev to do is to build endlessly monetized free-to-play machines. Games that are not designed experiences because no one has the hardware and instead are all about just

[21:22] reusing safe IPs that have worked before. Remaster after remaster made by fewer and fewer people. And it's about what we lose on the way. From the games from your friends to the graphics cards

[21:34] that you might have to borrow from your not friends. The industry will find a way to claw its money back from the one group of people who can't pass that cost on. That's us. I'm a console gamer at heart, but I've actually noticed myself

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