Fans of Sony might be disappointed with the launch of the PlayStation 5, which could cost nearly $500 at launch according to a report. When a new generation of video game systems launches, combatants in the war for consumer dollars often find themselves trying to turn a profit on hardware while still drawing an audience that will actually spend money on games and services. Since that can’t happen if no one buys the system, this can be problematic when production costs are high. And if pricing on the system isn’t competitive enough, gamers will look elsewhere to satisfy their needs.
This issue hit Microsoft hard when the PlayStation 4 and Xbox One launched. Microsoft made numerous missteps when it launched the current generation Xbox. It failed to emphasize the gaming aspect of the new system, choosing to focus on home entertainment features. It didn’t have enough exclusives. It tried to sell gamers on a camera monitoring their every move as a good thing. Mostly, it came down to price. The Xbox One launched with a hefty price tag of $499. The PlayStation 4, on the other hand, hit the shelves at $399. The rest is history. Gamers flocked to the cheaper PlayStation 4, which also offered a boatload of exclusives. But the last time Sony tried to price a system above Microsoft’s Xbox 360 with the launch of the PlayStation 3, it didn’t go well for the company, which spent years recovering from the damage.
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Microsoft doesn’t have the exclusives Sony has or will have. But according to a report from Bloomberg, it might edge Sony out on price. The PlayStation 5 costs roughly $450 to produce largely because of the scarcity of some essential parts, including DRAM and NAND. Currently, these are sought by numerous smartphone developers, making them hard to secure cheaply enough to bring down production costs.
The PlayStation 4 cost around $381 to produce. If Sony sells the next-gen console at a similar price point relative to the production costs, this means that the PlayStation 5 could cost close to $500 ($470 at the lowest) if it wants to turn a profit on the system itself. Since Sony customers are accustomed to paying $399 for a system, this might be a hard sell for gamers. Microsoft has yet to set a price for Series X but is expected to at E3 in June.
Sony has been quiet about its pricing, preferring to play a wait-and-see game with the competition and apparently planning to announce its price based on what Microsoft does. The high production costs don’t necessarily spell doom for the PlayStation 5. Sony could, as others have in the past, choose to sell the system at a loss. The system itself is never the moneymaker, after all. The real money is in games, subscription services, and other opportunities that only present themselves when a healthy number of players are enjoying themselves on a particular system. While it’s unclear what Sony will do, it’s very possible that PlayStation fans will experience a bit of sticker shock when it comes time to upgrade.
Source: Bloomberg
