The Sony PS5 Is Making the PS4 Look Cheapby Alex Cranz
Bloomberg is reporting that Sony is having a problem driving the price down on this year’s PS5. The console is expected to launch later this year, but Sony is struggling to get the cost of manufacturing below $450 per unit.
According to Bloomberg the challenge currently is sourcing key components for the PS5 at a reasonable price. DRAM and NAND flash memory appear to be the components Sony is having trouble getting cheap. Both are crucial if Sony wants to maintain the incredible load times its been bragging about for the PS5. Both are widely used in high-end phones and laptops. Given that it has reportedly been trying to beat Sony on raw power when it launches its next-gen console, the Xbox Series X, Microsoft may also be contributing to the shortage as it would likely be using similar materials.
The $450 number being thrown around in the Bloomberg piece isn’t the cost of the PS5 when it will be sold in stores—but the amount required to manufacture it. Typically this is a good indicator of what the actual device will cost too. The PS4 cost $381 to manufacture, according to IHS Markit, and retailed for $400. By that math, the PS5 would need to cost around $470 to maintain the same kind of profit.
But console makers, like phone makers, will often sell the hardware at a loss and recoup the money through software sales (games). So it could be cheaper. That’s what Sony had to do in 2006 when it sold the beastly PS3 at a massive loss. The 20GB PS3 sold for $500, but according to at least one teardown, cost approximately $805.85 to produce.
Only the PS3 had a bigger problem than the $300 loss it had to eat on every PS3 sale. Consumers balked at the $500 price tag and the cheaper Xbox 360 quickly outsold the PS3. By March 2007 Sony’s gaming division was reporting a whopping $1.97 billion loss.
Perhaps gamers are more willing to eat the cost of a high-end console now than in 2006—especially given that a good GPU can cost the same as a high-end console. But when you can get a Nintendo Switch for as little as $200, a console that costs twice as much feels like a hard sell.
That could be one reason Sony is expected to update its PSVR headset with the PS5 as well. Bloomberg notes Sony is planning to release a new headset for the VR system after the PS5. If the cost of the PS5 is as high as its manufacturing cost suggests, a high-quality and easy to set up VR headset could be one way to entice customers wooed by the siren song of Nintendo’s affordability and PC gaming’s flexibility.
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