Video game enthusiasts worldwide are looking forward to Sony’s PlayStation 5 launch this fall, but a new report says challenges in sourcing affordable parts may mean that the console comes with a higher price tag than players want to pay.
Sony so far is unable to get the manufacturing cost for a PlayStation 5 below $450, Bloomberg reports, which may result in difficulty for the company.
The consoles are slated to hit shelves within the next ten months, but apparently a few parts for it are not yet finalized. “We must keep PlayStation 5’s bill of materials under our control, and we need to make the correct number of units in the initial production,” Sony Chief Financial Officer Hiroki Totoki said in a recent earnings call.
Sources tell Bloomberg the problem is basically good old-fashioned supply and demand. Sony isn’t just competing with console rival Microsoft for parts; other device-makers are also in the mix. Prices for DRAM and NAND flash memory are reportedly running high amid high demand from businesses, such as Samsung, launching new generations of high-end flagship mobile phones.
Sony is also reportedly spending more than usual on the console’s cooling system in order to prevent overheating. The promised hardware, including an eight-core AMD Ryzen CPU built on the 7nm Zen 2 microarchitecture and an AMD Radeon-based GPU with ray-tracing support, can probably use it.
That tracks with what we know about Xbox Series X, which is reportedly built with nearly identical AMD architecture. Late last year, Microsoft revealed how huge its console will be, possibly indicative of its own complicated cooling design. We don’t yet know what the final PS5 hardware looks like, but its V-shaped development kit inspired almost as much discussion about its own cooling requirements as it did jokes about the console’s use as a pizza holder.
A difference of a dollar here and a dollar there does indeed add up. Sony could theoretically decide it’s worthwhile to sell the consoles at a loss and make up the cash elsewhere. Far more likely, though, is that whatever Sony has to pay in order to get a console manufactured, consumers will pay more than that to buy one. The current-generation PlayStation 4 reportedly cost $381 per unit to manufacture originally. At launch in 2013, units sold for about $20 more than that—a thin margin, to be sure, but a margin nonetheless. If Sony took a similar tactic this time around, the expected launch price for a PS5 would be around $470.
We asked Sony Interactive Entertainment about the report but have not yet received a reply.
Playing pricing chicken
Sony, of course, is not the only player in the console gaming market. Whatever the PS5 costs will no doubt be informed by the price point Microsoft sets for the next iteration of the Xbox line. The Series X, like the PS4, is planned to be in stores for holiday 2020, which means someone will have to blink first.
Industry-watchers expect Microsoft to present additional details, including pricing, for the Series X console (or consoles) at this year’s Electronic Entertainment Expo in June. Sony, however, recently confirmed that it will not be attending or presenting at E3. Without a known press conference on the calendar for months in advance, Sony has more flexibility to determine when and how it will announce a price point, as well as other details.
Going second decidedly has its advantages. Holding fire certainly worked out well for Sony at the start of the previous (current) console generation; its announcement at E3 2013 that the PlayStation 4 would retail for $399 came a scant few hours after Microsoft announced a $499 price point for the Xbox One. The reveal was a mic drop moment for the ages, as these things go, and set the tone for the fall launch. (Sony pulled a similar move in generations past when it blew the Sega Saturn out of the water.)
Of course, launch price isn’t everything. A console generation in the 21st century seems to last about seven years, and various price drops and refreshed SKUs are now standard mid-cyle developments. Shortly before the PS4 and Xbox One launched, Ars took a look at historical pricing data and found price drops two to three years after launch to be common. The PS4 and Xbox One were no exception: the PS4 dropped to $349 in 2015, and the original Xbox One dropped to $249 in 2016 ahead of the launch of the smaller, cheaper Xbox One S that summer.
From what we know of the Series X so far, its specs seem similar enough to Sony’s that both consoles could just end up launching at the same price point. Microsoft may have another wrench to throw in Sony’s plans, however. Reports indicate that Microsoft is also working on a lower-cost, digital-only gaming box to be sold alongside the Series X this fall.
There are conflicting reports on precisely what kind of digital experience Microsoft has in mind. Some reports say the mid-range console, codenamed Lockhart, was scrapped in favor of working on a streaming-only device that would work more like a gaming Roku (or Google’s still-challenged Stadia) and be priced in a similar, under-$100 range. Other reports, however, indicate that Lockhart is still on as a lower-powered disc-less console and that developers will be expected fully to support it alongside the Series X—similar to what Microsoft did with the Xbox One S. Either option, if they pan out, could fall into the sweet spot where Microsoft has something to sell at half or less of whatever the PS5 price ends up being.