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PlayStation 5: Even The Manufacturing Costs Are Higher?

Bloomberg‘s report makes us worry that we’ll have to pay a bit more for the next-gen consoles.

Bloomberg cites „people with knowledge of the matter” that the PlayStation 5‘s manufacturing costs are about 450 dollars. We repeat: this is the MANUFACTURING cost. The higher costs are claimed to be due to lack of components – Sony Interactive Entertainment (shortened to SIE onwards) can’t find a reliable supply of NAND and DRAM flash memory, as both are high in demand. Thus, the company doesn’t decide about the console’s price in February but later. This also likely impacts the PlayStation 5’s reveal event. Bloomberg also cites „people within the PlayStation business” that one of the key factors in the PS5‘s pricing is going to be the price tag that the competition, namely Microsoft’s Xbox Series X will have. (We previously wrote about this subject, so it’s possibly true.)

Some of the SIE staff believes that the console should have been sold at a loss if necessary to match the rival’s pricing. They think the game sales, as well as the online services (PlayStation Now, PlayStation Plus…), will turn a profit.

Most of the components of the PlayStation 5 has been locked down, including the „unusually expensive” cooling system, which would „make sure heat dissipation from the powerful chips housed inside the console isn’t an issue.” Bloomberg also cites a few people that Sony was previously planning a mirrorless camera, but some features are getting cut because of the DRAM supply. The coronavirus seems to have no impact on the preparation of the PlayStation 5’s production, as SIE hasn’t decided about how many PS5 units should be made for the first year. Also, several PlayStation 5 games will be available on PlayStation 4, too.

Hiroki Totoki, Sony’s chief financial officer, is reportedly putting a lot of pressure on the situation: he wants more transparency and information, as they want to provide guidance for the PlayStation brand by the end of April (when the fiscal Q4 report, as well as the forecast for the next fiscal year, will be released). The site also says that the PlayStation VR will get a new model, but it will arrive after the PlayStation 5. (And we also wrote about this topic, so it seems plausible.)

„I’d say this would be fairly accurate based on what I’ve heard, but still all unconfirmed. I previously estimated the build cost of [the Xbox] Series X would be higher at over $460 minimum and still expect that to be the case. The build cost is not the retail price. As the article states, a $450 build cost would probably result in a retail price close to $500.

I think at this point it’s unrealistic to assume we’ll get a high-end console at $399 like last gen. The PlayStation 4 was sold at a loss on day 1. Its total build cost was $381, but the additional costs involved, such as retailer margin, pushed the total cost for Sony over $399. Took a few months for them to make a profit on that price.

The Xbox Series X build cost [is] likely higher than PS5 (as of now), but not significantly so. The pricing will likely be similar to or higher than build cost for both devices. However, both manufacturers could be willing to take a loss day one to price more competitively. Sony and Microsoft have been able to offset the traditional cyclical nature of console profits/losses by generating a constant stream of revenue via subscriptions and add on content, so they can experiment with pricing somewhat,” Daniel Ahmad, a senior analyst at Niko Partners, wrote on Twitter, confirming what Bloomberg reported.

So the situation is somewhat foggy for now: Sony lacks components, and they also wait for Microsoft to reveal the price. However, we can now expect PlayStation to lose its price advantage…

Source: Gematsu, Wccftech

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