The PlayStation 5 Could be Sold at a Loss – Here’s Why:

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Sourced from GGR.com.

Japanese electronics and entertainment conglomerate, Sony is struggling to come to a price for their new ninth-generation console, the PlayStation 5, due to scarce components and pressure to beat out rival, Microsoft.

Over the past few months, the world is buzzing with information about Sony’s new console, the fifth edition of the PlayStation series after six years with its previous iteration, the PS4.

According to Bloomberg, Sony is looking to release the PS5 alongside its biggest competitor and rival, Microsoft’s Xbox Series X. However, unlike previous years where Sony typically finalizes a price in February of the release year followed by the respective console’s mass production, this year Sony is taking a ‘wait-and-see’ approach.

In 2013, the PlayStation 4 released, retailing at $399 and was estimated to have cost $381 to manufacture. The PlayStation 5 costs $450 to manufacture, per unit. Macquarie Capital analyst Damian Thong estimates that the retail marked-up price would then at least be around $470, about $70 more than Sony’s current most expensive machine – the PS4 Pro, which boasts better graphical and stability-aiding hardware than the standard PS4.


Thong notes that even then, the PS4 Pro is often discounted due to low sales. The PS5 is noted to have a more expensive than usual cooling system as Sony opted to lavish more on making sure heat dissipation from the powerful chips housed inside the console isn’t an issue.

“Consumers will benchmark their expectations based on the PS4 Pro and PS4,” Thong said. “If Sony prices above that, it would likely be to balance a need to offset higher materials cost, against risk demand.’

Sony’s biggest issue with the pricing is ensuring a steady supply of DRAM and NAND flash memory – which are both in high demand as smartphone makers prepare to release their fifth-generation devices.

Samsung just announced its new Galaxy S20, with each variant having 5G and a minimum of 12GB of RAM in the US. Sony will be competing with them to ensure they have enough components to build as many PS5s as they need.

Sony, of course, could always mark-down the price. Videogame companies often sell hardware with thin margins, or even at a loss trusting their game software and monthly online subscriptions, like PlayStation Plus+, hoping they will build buoyant profits for the company.

Sony’s CEO, Kenichiro Yoshida says that the business should be judged by the number of active users, not the number of hardware units sold. Some of the staff at Sony games seem to echo his sentiment, believing is better to sell at a loss in order to match Microsoft’s price.

Other Sony executives ask for patience about the next-gen console’s pricing as they anticipate the transition from PS4 to PS5 to be a gradual one. Many of the games launched for the PlayStation 5 will still be available for the PS4 so Sony expects revenue from software and related network services to keep business performance intact.

Edited by Luis Monzon

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