It's no secret that inflation is hitting the world hard. Over the past year, with more money flowing into the economy than products and services to support it, the price of nearly everything has gone up. In the US, we have seen the highest percentages of inflation in over 40 years over the past few months - sometimes nearing 10 percent. While costs are rising, some products, especially in the tech world, have remained the same. Often, this is because a price was announced for the product when it was brought to market, making it difficult to change later. Despite this issue, Sony has decided to increase the price of the PlayStation 5 in most major markets, while Microsoft and Nintendo have said that they have no plans to follow suit.
The problem with fixed pricing
Under normal circumstances, the price of components goes down over time. This is caused by a variety of factors, but primarily, the more of an item you make, the easier and less expensive it becomes to produce. This means that the internal components that go into a product, such as a gaming console, become less expensive to produce, so they become less expensive to acquire. That makes the profit margin of the end product better, which can allow the company to lower the retail price.
However, in an environment of extreme inflation like we've been seeing this year, the roles are reversed. The cost of the components in the product goes up because the cost of producing those components is going up. Even labor becomes more expensive. In this scenario, the margin goes down and, when you have a product that is already living on the edge of profitability, it can create a massive issue for manufacturers. This is the scenario in which Sony, Microsoft, and Nintendo find themselves.
Sony's price increase
It was revealed this week that Sony plans to increase the price of its PlayStation 5 consoles around the world in nearly every market. In fact, the only major market Sony said would not be receiving a price increase is the United States. Every other market will see an average price increase between $30 and $80, affecting both the Blu-Ray and Digital Edition models. Sony Interactive Entertainment President Jim Ryan said,
We're seeing high global inflation rates, as well as adverse currency trends, impacting consumers and creating pressure on many industries.
This is the same reasoning as Meta gave when it increased the price of the Quest 2 hardware last month, albeit by a lot more than Sony is raising the prices of the PS5 (33 percent).
Microsoft and Nintendo holding strong
Nintendo followed Microsoft, in a statement to Eurogamer, the company said there are "no plans to increase the trade price of its hardware."
This move from both companies could be the long-term plans of the company, or it could simply be a PlayStation 4 style last minute change after seeing public reaction to the news of its competitor. Sony famously changed the marketing plans for the PS4 after public reaction to Microsoft's plans to include the Kinect with the Xbox One, removing the PlayStation Move from the box. In this case, Microsoft and Nintendo could be seeing the negative press that Sony is receiving and hitting them while they're down. Either way, it looks like the Xbox and Switch just became even more attractive options for gamers.