Component pricing may make PlayStation 5 hard to price for Sony - The UpStream

Component pricing may make PlayStation 5 hard to price for Sony

posted Sunday Feb 16, 2020 by Scott Ertz

Component pricing may make PlayStation 5 hard to price for Sony

In the last console generation, pricing had a huge impact on initial console sales. During their respective E3 press conferences that year, Microsoft and Sony announced their console launch prices, with the Xbox One premiering at $499 bundled with a Kinect, and the PlayStation 4 premiering at $399 with the PlayStation Eye and Move offered as an optional $100 add-on. But, Sony actually made a change to its business plans following response to Microsoft's announcement, which came first. Originally, the PlayStation 4 was going to be bundled with the Eye and Move for $499. That decision changed the entire generation.

This generation, it appears that pricing could once again have a huge impact on sales, but this time Sony is not in charge. Instead, Sony is having trouble even nailing down the cost of the manufacturing for the PlayStation 5 because of the rising cost of some of its components. Speaking with Bloomberg, unnamed sources close to the situation have said that the current cost of building the console is around $450. That means that, if Sony keeps the same slim profit margin of the launch day PS4, the PlayStation 5 is going to have to sell for at least $470.

That price would put it far above anything Sony has on the market now, with the PlayStation 4 Pro retailing back at the original price of $399, but is often found on sale or in discounted bundles. According to Damian Thong, an analyst for Macquarie Capital,

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

This means that we could see Sony pricing the PlayStation 5 higher than the $470 price point, expecting component prices to continue to rise. On the flip side, Microsoft's poorly named Xbox Series X opted to go with a lot of custom components for the core system, meaning that they have more control over the end price of components. That doesn't mean that the price of the elements won't change, but it does allow the company to have a better grip on their costs than where Sony seems to be today.

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