The high price of next-gen storage.
Xbox Series X storage

Microsoft has come out and said that the cost of 1TB of expandable storage for the Xbox Series X|S will run you a lofty $219.99 (USD). This expandable storage will come in the form of small cards that will slot into the rear of both the Xbox Series X and the Xbox Series S. They will match the internal SSD speeds and provide 1TB of additional storage capacity.

If you're wondering why the storage is so expensive, knowing that it is proprietary might clue you in. Seagate has been revealed as the only manufacturer thus far for this expandable storage. Microsoft says that additional suppliers and sizes will be made available in the future.

The good news is that you can play games directly from this Seagate branded expansion card. The bad news is that it will just cost you a pretty penny to do so. If you have other external storage solutions, you will be able to store your games on that external storage solution, but you will not be able to play games that are "optimized for Xbox Series X|S." This is according to Microsoft in a special Q&A.

Will you be able to play games right from the Storage Expansion Card or do they need to be copied to the internal storage?

Jason Ronald: You can play directly from the Storage Expansion Card and you will have the exact same experience and performance as if the game was running from the internal SSD. Not only does this apply to games optimized for Xbox Series X|S, but also your favorite backwards compatible Xbox One, Xbox 360 and original Xbox games. When backwards compatible games are played directly from either the internal SSD or the Storage Expansion Card you will see significant improvements in load times due to the next generation performance of Xbox Series X|S.
USB 3.1 HDD Seagate Expansion Card
Stores any Xbox game Yes Yes
Plays Xbox One, Xbox 360, and Original Xbox games Yes Yes
Plays games optimized for Xbox Series X|S No Yes
Replicates speed and performance of internal SSD No Yes
On the other side of the coin is Sony who will allow users to upgrade their internal storage capacity, but only if certain speed requirements are met on the selected SSDs. More than likely, these will be limited to PCIe 4.0 NVMe drives, which there just aren't too many of right now. Samsung has their 980 Pro that was just announced, with a price that sets it up for 1TB at $229.99 (USD). As PCIe NVMe drives become more prevalent, you can expect these prices to go down. The same might not be true for the proprietary drives from Seagate for the Xbox Series X|S.

Why does the 1TB Storage Expansion Card cost $219.99?

Jason Ronald:
The Xbox Velocity Architecture is a key innovation of our next generation consoles, delivering unprecedented speed and performance enabling transformative gaming experiences never before possible on console. This level of consistent, sustained performance requires advanced components which comes at a higher cost than traditional hard drives or SSDs often found in PCs. By partnering with an industry leader in Seagate, we worked together to deliver an expandable storage solution which delivers identical performance at the lowest cost possible and available this holiday.