For console game manufacturers, only making small profits or even losing money in marketing products is not new. You might have heard about PlayStation 3 production costs, which are more expensive than the price of the unit, then Sony also doesn’t get much profit from sales of PlayStation 4. Usually, the company’s new profits are achieved through software and premium services such as PlayStation Plus.
Based on reports from a number of sources to Bloomberg, the conditions that Sony faced when producing PlayStation 3 would likely repeat itself on PlayStation 5. The Japanese console maker is reportedly having difficulty suppressing the price of their next-gen consoles. As a result, a number of features had to be removed. And this may be the reason why Sony has not announced the price of PlayStation 5 and is waiting for Microsoft to reveal the price of the Xbox Series X.
From the informant’s information, the PlayStation 5’s production costs reached US $ 450 per unit. The situation was caused by the scarcity of a number of important supporting components such as DRAM and NAND flash memory. If Sony doesn’t want to lose money like in the PS3 era, then they need to sell the next-gen hardware at least at US $ 470. According to analyst Damian Thong from Macquarie Capital, this figure does look less attractive to consumers.
The reason is simple: consumers will compare PlayStation 5 with PS4 and PS4 Pro. The more expensive price of the current-gen console suggests the high price of the materials making up the product. These conditions have the potential to reduce the number of requests, especially so far the biggest game titles (for example The Last of Us Part II and Ghost of Tsushima) will still be present on PlayStation 4. And thanks to backward compatibility support, I suspect fans will not even rush switch to PS5.
In comparison, the PlayStation 4 is priced at US $ 400 at the time of its launch and now you can have a standard variant just by spending US $ 300. Referring to the IHS Market estimate, Sony requires a capital of US $ 381 to produce one unit of PS4. That means even though thin, there are still profits that companies get from console sales.
DRAM and NAND have recently become difficult to obtain because not only home console manufacturers need them. Smartphone companies also need these components to produce 5G devices, for example Samsung has just revealed the Galaxy S20 family. These smartphones are supported by fifth generation wireless technology and at least 12GB of RAM (in the United States).
Of course it’s not just Sony that is ‘forced’ to market the next-gen platform at high prices. Analyst Daniel Ahmad estimates, the fourth generation Xbox will be pegged in the range of US $ 500 – maybe above the PS5 because of more sophisticated hardware specifications and with even thinner profits.