Sony Is Being Defensive With The PS5 – And That Is A Smart Move
Sometimes, defense can be the best offense.
Posted By Pramath | On 24th, Feb. 2020 Under Article, Editorials
Recently, I asked what Sony is waiting for when it comes to showing off the PS5, because we are now almost done with February, and while the console is still due to launch later this year, Sony is being surprisingly reticent with sharing details about it. But in a sense, the question has already been answered by Chief Financial Officer Hiroki Totoki. Speaking to investors during Sony’s financial briefing, he said that Sony hasn’t revealed the PS5’s price because they are waiting for Microsoft to show their hand first.
Now, to be very honest, no one needs Sony to reveal the price of the PS5 right now, really. Most consoles don’t have their price announced upon reveal, which is instead reserved for showing off the hardware, controller, the system’s capabilities, and so on. The price announcement comes much later. But this statement by Totoki gives us an insight into Sony’s mindset – they don’t want to be the first ones to go.
This is actually in line with how Sony has handled PlayStation for most of its life, and it has brought them nothing but success so far. Sony waited for Sega to play their hand with the Saturn, before sweeping the rug out from under them with the announcement of a much cheaper console, with far more cohesive hardware, and a unified launch strategy compared to Sega’s slapdash approach to, well, everything. Sony waited for Sega to fire the last bullets in its chamber with Dreamcast, before, again, totally sweeping the specter of that console away with the promise of the PlayStation 2. Sony waited for Nintendo to announce the 3DS and its pricing before they announced that the much more capable and more attractive Vita would be available for that same price. And most recently, Sony let Microsoft make fools out of themselves during the Xbox One reveal, before stepping in and letting the clarity of vision and design of the PS4 (which, by the way, was also cheaper) win the masses over.
This strategy has always worked for Sony, with the one exception being the Vita, where Nintendo, in a bid to secure the handheld market, undercut the Vita before it had a chance to get going, and ended Sony’s portable ambitions once and for all.
But the Vita aside, Sony has always found nothing but success with this strategy. The PlayStation dominated the competition; the PlayStation 2 is the highest selling console of all time to this day. The PS4 reigned at the top of the market, and had no true challenger until Nintendo had to reboot its entire brand with the Switch.
In fact, the few times Sony has been forthcoming with what they are planning on doing with their hardware, it hasn’t gone that well for them, with the PS3’s early reveal only confusing and antagonizing a whole lot of people. While with the PS3, too, Sony waited to reveal the price until aftet the Xbox 360 had already launched, the early announcement and details Sony shared about the console had already cast a cloud of doubt and misgivings around the system going into E3 2006, which was when the infamous $599 moment happened.
Sony ended up turning the PS3 around, of course, and it was ultimately a great console, but that came at a great cost to them. The PS3 is single handedly estimated to have wiped all the profits Sony made with the PS1 and PS2, in spite of the PSP also bringing in money at the time. That’s how much of a financial hole that system was.
And that brings us to the crux of the matter with the PS5. Totoki noted that Sony intends for the PS5 to be profitable over its life; this means that Sony is, at the very least, not planning on selling it for a huge loss at launch (since it would be harder to get the console in the black if they launch at a low price, even accounting for economies of scale), and at best, planning on selling it above cost.
But what they also don’t know is what Microsoft might do here – with the PS3, Sony was entirely undercut by an aggressive Microsoft, who sold a cheaper Xbox 360, and managed to siphon a lot of PlayStation’s success over to themselves. If Sony, for instance, wants to sell the PS5 for $499, but Microsoft, in an attempt to be aggressive, wants to price the Series X at $399, then Sony will find itself in the same situation as Microsoft found themselves in 2013 – or Sony themselves were in 2006. For the mass market, the bulk of the people who buy consoles, and mostly only use them to play FIFA, Madden, GTA, Call of Duty, and Assassin’s Creed, the single most important element deciding what console to purchase is the price. If Sony has the more expensive system on the market, then Microsoft will take that audience, and bolster its install base substantially, at the expense of Sony’s.
On the other hand, Sony can’t pre-empt this scenario by pricing the PS5 low as well. If they decide to, for instance, sell the PS5 at $399 to prevent Microsoft from having the price advantage, but then Microsoft prices the Series X at $499, then Sony cut into their profits for no reason whatsoever. And while Microsoft, a trillion dollar company that has finally started to take video games seriously, can take big hits per hardware unit sold, Sony cannot. By its CFO’s own admission, the PS5 should be profitable over its life. Sony may be healthier now than they were in the PS3 era, and a leaner and more streamlined company, but if they get into a financial war with the richest company on the planet, they would lose – as, again, they almost did with the PS3, losing an enormous amount of money in the process.
So Sony’s decision to wait makes sense. There really isn’t much of a hurry. Not for the price, not even for the console’s release later this year. This is a business that has cultivated the strongest console gaming brand in history – they know what they are doing, as much as fanboys on the internet want to see their latest and greatest creation now.
One could argue that this betrays a defensive mindset from Sony – but see, the thing is, being defensive isn’t a bad thing. In fact, most of the times, it’s the exact opposite. Sony has demonstrated that for 25 years, and they might just be about to do that again soon.
Note: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, GamingBolt as an organization.