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Sony Is Struggling With PlayStation 5 Price Due to Costly Parts
- Thread starter CyberPanda
- Start date
thicc_girls_are_teh_best
Gold Member
Sony Is Struggling With PlayStation 5 Price Due to Costly Parts
Scarce components have pushed the manufacturing costs for Sony Corp.’s next PlayStation to around $450 per unit, forcing a difficult price-setting decision in its battle with Microsoft Corp., according to people with knowledge of the matter.www.bloomberg.com
Sony Is Struggling With PlayStation 5 Price Due to Costly Parts
By
Takashi Mochizuki
February 14, 2020, 9:20 AM GMT+5:30
Scarce components have pushed the manufacturing costs for Sony Corp.’s next PlayStation to around $450 per unit, forcing a difficult price-setting decision in its battle with Microsoft Corp., according to people with knowledge of the matter.
- May wait for Microsoft’s Xbox group to make first pricing move
- New PlayStation VR headset also planned after PS5 launch
The Japanese conglomerate is preparing to gradually replace the six-year-old PS4 console, releasing its PlayStation 5 the same holiday season its archrival debuts the upcoming Xbox Series X. Sony typically finalizes a console’s price in February of the release year, followed by mass production in the spring. With the PS5, the company is taking a wait-and-see approach, said the people, asking not to be named because the details are private.
The PS4, released in 2013 at a retail price of $399, was estimated by IHS Markit to cost $381 to manufacture. With the $450 unit cost and a similar gross margin, the PlayStation 5’s retail price would have to be at least $470. That would be a hard sell to consumers, considering Sony’s most expensive machine now is the $399.99 PS4 Pro and is often discounted, according to Macquarie Capital analyst Damian Thong.
“Consumers will benchmark their expectations based on the PS4 Pro and PS4,” Thong said. “If Sony prices above that, it would likely be to balance a need to offset higher materials cost, against risk to demand.”
Sony declined to comment.
The company’s biggest headache is ensuring a reliable supply of DRAM and NAND flash memory, with both in high demand as smartphone makers gear up for fifth-generation devices, according to people familiar with Sony’s operations. Samsung Electronics Co. just announced its Galaxy S20product range, each variant of which will have 5G and a minimum of 12GB of RAM in the U.S.
Videogame companies often sell hardware at thin margins or even at a loss because they profit from lucrative game software and recurring online subscription services. Sony’s Chief Executive Officer Kenichiro Yoshida has said the business should be judged by the number of active users, not the number of hardware units sold. Some Sony games staff think it should sell the new console at a loss if necessary to match Microsoft’s price, while other Sony executives would prefer to make money as the company did with the PS4.
“We must keep PlayStation 5’s bill of materials under our control and we need to make the correct number of units in the initial production,” Sony’s Chief Financial Officer Hiroki Totoki said at an earnings briefing earlier this month.
Most of the components for the console have been locked down, the people said, including the cooling system, which is unusually expensive at a few dollars per unit. Typically, companies would spend less than a dollar, but Sony opted to lavish more on making sure heat dissipation from the powerful chips housed inside the console isn’t an issue.
The ongoing coronavirus outbreak has had no impact so far on preparations for PlayStation 5 production, they said. The company has yet to decided how many PlayStation 5 units it will make in the first year, they added.
Separately, Sony plans to release a new version of the PlayStation VR virtual-reality headset, tentatively scheduled after the PlayStation 5 goes on sale, the people said.
Sony has already canceled some previously planned features for a new mirrorless camera due this year owing to the constrained DRAM supply, several people with knowledge of the matter said.
Sony executives are voicing patience about the next console’s pricing as they anticipate the transition to be a gradual one, said people familiar with its day-to-day operations. Many of the games launched for the PlayStation 5 will also be available to play on the predecessor machine, so revenue from software and related network services is expected to keep the business performance intact. Microsoft and Sony are both expanding their respective online subscription services, revenue from which may allow them greater flexibility on hardware pricing.
People within the PlayStation business unit said a key factor in deciding the ultimate PlayStation 5 retail price will be where Microsoft sets its price for the next-generation Xbox Series X. Microsoft is widely expected to hold that information back until the E3 gaming expo in Los Angeles in June.
There is pressure from CFO Totoki for Sony to provide more transparency and information in the buildup to the PS5’s release, which has caused some consternation internally. Asked about when he expects Sony to provide guidance on the gaming business outlook for the new fiscal year, Totoki said the plan is no different from the recent past, meaning the guidance can be expected around the end of April.
If the company takes longer than usual, analysts may look to its next investor relations meeting to glean hints about the new console’s retail price. The company held that meeting in late May last year.
More or less in line with what I've been expecting out of them. I do think the relative lack of transparency is not a good sign, tbh.
Probably worrying for some of the TFWarBoyz would be the cooling mention in all of that. I hope my theory/speculation holds out but saying the cooling is "very unusual" actually doesn't give too much hope on that front given what we've already seen with devkits and what a certain leak and successive benchmarks are generally showing. Only thing that can really assure me of a best-case scenario on that front is a new benchmark datamine with a somewhat beefier Oberon...we still got 'till end of March
I'm still #Team10.4_11 but I'm also covering my ass with a soft #Team9.2 because let's face it there's still a good bit of circumstantial coincidences and evidence tracing a while back that can support that one as well :S
All of that said, at the end of the day I don't think anyone should be obsessing over TFs so damn much. These systems are going to have some amazing stuff coming for next-gen and you would be surprised how often throughout console history systems that were considered the "weaker" ones could turn up arguably some of the most amazing looking games of that generation. Take PS2 for example. Generally outclassed by Gamecube and Xbox, but had the best-looking sim racers of that gen in GT3 and GT4, hands down. Best-looking JRPGs too in FFX (at the time it came out), and FFXII. Arguably the best-looking platformers that gen in games like Jak 3, Ratchet & Clank etc.
Basically, you don't need the most powerful console to have at least some of the best-looking games. You just need a system that's relatively capable and a flock of developers who can make it sing. Sony already has that with their 1st party these days, and PS5 and XSX will be competitive with each other regardless of where each one falls on the tech side of things. And PS still has the majority support from 3rd-parties, something (along with pushing harder on 1st-party content) MS has to up their game on, and I expect them to.
So yeah, I know a lot of people aren't going to like my take on some of the stuff I've just mentioned, but hopefully you also see that I'm coming at it from the bigger picture, and that power really doesn't mean everything. Hasn't Nintendo been consistently proving that for over a decade by now?
Fake
Member
You still don't get. Fanboys not always are smart, but that don't mean fanboys are the only one who get the product day one.
Fushitsusha
Banned
More like "costly ports"
K.N.W.
Member
Even my PS fanboy brain is bleeding. GT4 looked really Xboxish, but you must have never seen Conker and Shrek on Xbox or Starfox Adventures on Gamecube. They look million times better than Ratchet or Jak.
Of course not, there are good reasons to buy a PS5 day 1. The difference is, that fanboys would buy it for 1000 bucks even if it was just a pink painted 10% tuned PS4 Pro with a PS5 sign on it.
Bolivar687
Banned
I sincerely hope you guys realize the extent to which Microsoft plants fake articles exactly like this one throughout the media in the run up to every product launch they've ever had.
It's literally the only thing they know how to do.
It's literally the only thing they know how to do.
I don’t think having the same BOM paints the whole picture of being the same power? A SSD solution could cost more for example as the other, or a gpu with more CU...
But could mean more processing grunt for one and bigger / faster world loading for the other.
Kinect and ESRAM really but pressure on MS with what we got.
This gen will be gastland different in this respect.
But could mean more processing grunt for one and bigger / faster world loading for the other.
Kinect and ESRAM really but pressure on MS with what we got.
This gen will be gastland different in this respect.
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Investor9872
Member
It almost sounds to me like Sony might use less RAM then what was originally intended, and are prepping us for it by leaking it to this reporter. If there truly is a constraint of RAM memory in the supply chain, why not wait till next year, Fall 2021, to release the PS5? Sure, the XSX will have a 1-year lead, but Sony has done this before with the PS3, which was released a year after the XB360, and it ended up outselling the XB360 by a few consoles in the end, even though it was harder to work with.
It's pretty obvious gamers are spoilt! I knew that $400 price point was just too good to be true. Sony will struggle to hit that, and make marginal profits or break even.
Gamers need to let that $400 price point go. Let it go. It's only hurting the technical improvements that can be attained. People spend more on phones, easily (yes, they usually come with plans, I know), every two to three years. But they want the latest and greatest, most powerful tech in machines that will last upwards of 7 years, but refuse to pay more than $400 for it. It's asinine! As is, console sales yield very little profit. The profit margins increase down the years and production costs get cheaper, but out the gate console manufacturers barely break even. Microsoft said this, and everyone doubted them. Sony won't speak to this much, because they love to tout their sale numbers. And while those numbers are phenomenal, I really don't think they translate to much profits. The money is in selling software/subscriptions/services. Even Sony's little corporate slide that came out May 2019 showed they'd have a strong focus on that. I wonder why...?
I sincerely hope the cheapest console starts at $500. You have roughly 10 months to start saving. I said it once, and I'll say it again; if saving $500 in 10 months is too difficult for you, gaming should be your last concern!
New tech isn't cheap. The best and the greatest isn't cheap; it never is. I don't know why people make exceptions about those rules in every other facet of tech, but completely disregard it when it comes to gaming.
Gamers need to let that $400 price point go. Let it go. It's only hurting the technical improvements that can be attained. People spend more on phones, easily (yes, they usually come with plans, I know), every two to three years. But they want the latest and greatest, most powerful tech in machines that will last upwards of 7 years, but refuse to pay more than $400 for it. It's asinine! As is, console sales yield very little profit. The profit margins increase down the years and production costs get cheaper, but out the gate console manufacturers barely break even. Microsoft said this, and everyone doubted them. Sony won't speak to this much, because they love to tout their sale numbers. And while those numbers are phenomenal, I really don't think they translate to much profits. The money is in selling software/subscriptions/services. Even Sony's little corporate slide that came out May 2019 showed they'd have a strong focus on that. I wonder why...?
I sincerely hope the cheapest console starts at $500. You have roughly 10 months to start saving. I said it once, and I'll say it again; if saving $500 in 10 months is too difficult for you, gaming should be your last concern!
New tech isn't cheap. The best and the greatest isn't cheap; it never is. I don't know why people make exceptions about those rules in every other facet of tech, but completely disregard it when it comes to gaming.
diffusionx
Gold Member
Consoles are not the best and greatest, though. Not even close. They're not designed to be bleeding edge high end tech, they are first and foremost affordable and convenient gaming devices for a large amount of people. And those people will pay what they pay. Sony tried to convince people that $600 was a good price for their PS3, nobody bought it, they had to cut costs and release a cheaper system six months later. And no, "it costs a lot to make, please pay more" is not going to convince a single person outside of gaming forums to buy it. These are luxury devices, nobody needs to own a PS5, and the price has to reflect that reality.
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There is no way in hell they can give MS a year's head start. You are correct about PS3, but don't forget that Sony was given a possible lifeline (or two) that generation by MS. First there were shortages in the holiday run up (remember people buying the arcade version due to lack of choice). And then the RRoD dominated the headlines. Had MS come in with ample supply, and a motherboard that did not melt itself, we might be having completely opposite discussions about market share today.
Afro Republican
Banned
PlayStation 5's Price May've Been Revealed
Sony fans intending to upgrade their existing consoles to the PlayStation 5 when it launches later this year might want to start saving now, it would seem. A new report published by Bloomberg earlier today has revealed a number of interesting details about the next-gen hardware, including a...
wegotthiscovered.com
Pretty interesting if accurate. The fact nothing has been leaking similarly for Microsoft is curious because if they found a way to get around that it may determine which of these may end up being cheaper in November.
Although it's likely both will be $500 minimum, but you never know. Now with the wooha virus or whatever things could be even worse for production.
JareBear: Remastered
Banned
I’ve been preparing for 599 price tags for both XsX and PS5 but hoping for 499
499 would be a great value for the power/utility being offered
499 would be a great value for the power/utility being offered
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GymWolf
Member
For a machine that you use and abuse for thousands of hours in a span of 5-6 years?
Even 600 dollars is absolutely nothing for how much you are gonna use a console...
From a different perspective, a $100 or even $200 loss (on Sony's part) is nothing for how much said console will use and abuse my wallet.
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Trogdor1123
Gold Member
I used to think my pro was decently quiet... I never realised how loud it was till my wife came down and asked if it was in my game lol. Jet engine!
JareBear: Remastered
Banned
From a different perspective, a $100 or even $200 loss (on Sony's part) is nothing for how much said console will use and abuse my wallet.
SimonGosejohann
Banned
think about it:
if there is a different console that costs $100 less and offers +30% performance power, which console would you get? All multiplatform games will look and run better on said console. and exclusive games? dont matter at launch. these will take years to develop.
sublimit
Banned
It would have been better if you started with the thread's title by changing it to: "Opinion: Sony is struggling with playstation 5 price due to costly parts."
A lot of drama and misinformation could have been avoided.
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GymWolf
Member
How is this correlated to my post?
I was only pointing out that even 600 dollars are fucking nothing for a console that you use intensively for 5-6 years...
I'm aware that series x is probably gonna be the better machine for third party games, but for esclusives? You only need a pc for that. (And i have one)
But with sony? If they don't embrace pc gaming with exclusives games at day one on pc, i 'm gonna need to buy a ps5 because i really can't wait years to play their best games.
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.
AV
We ain't outta here in ten minutes, we won't need no rocket to fly through space
Killzone Shadow Fall and Knack were available at launch. Yes, obviously, they weren't very good. But neither you nor I have a single clue what the full launch lineup for PS5 looks like. They may have learned their lesson from last time and have a heavy hitter locked and loaded.
If Bluepoint really have got something like a Demon's Souls total remake ready for PS5 launch that could be huge.
thicc_girls_are_teh_best
Gold Member
I actually forgot about Starfox, but I remember it looking really good for its day. Can't remember much on Shrek, it was a licensed game and back then that wasn't really a good mark (was it good?). Conker was really impressive on Xbox tho technically speaking.
Still tho, I think Jak and R&C were on par with it artistically speaking, those games had very strong art direction.
Accusations without any proof. Sounds like a Twitter user
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AV
We ain't outta here in ten minutes, we won't need no rocket to fly through space
Killzone was only announced on Feb 20th, the year PS4 launched. I don't actually remember far back enough to know whether it was already leaked or anything, though.
JareBear: Remastered
Banned
K.N.W.
Member
Shrek was a bad bad bad game, moving Shrek just a couple of steps showed such atrocious animations you would had regretted buying it even for 5 dollars. But it was the first console game to use defered rendering
But what game? There is no game that everbody likes.
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VGEsoterica
Member
They’d be insane if they came in at $599. They obv learned that lesson with PS3
JareBear: Remastered
Banned
2006 was a long time ago
I mean, I’m hoping for 499, but for the power and functionality these consoles are expecting to offer, we gotta be prepared to pay for the performance.
jshackles
Gentlemen, we can rebuild it. We have the capability to make the world's first enhanced store. Steam will be that store. Better than it was before.
But that was also 14 years ago and inflation being what it is it means Sony would have to launch the PS5 at approximately $830 to be equivalent.
Absolutely. Of course they need some power but most of the customers are casuals that probably don't even own a 4k Tv and don't value power that much. They go by price. They have to find compromiese between price and power. I think it's 399 to 499 depending on what Microsoft does.
JareBear: Remastered
Banned
I honestly think it’s impossible to sell at 399 unless all the specs we know so far are lies. Are they selling at a huge loss per unit?
gotta be realistic
a 5700XT is 400 bucks on its own
I don't know what happens when there is a second cheaper Xbox as rumored. If Sony gets sandviched between a stronger Anaconda and a weaker Lockhart they might need to undercut Anaconda and get closer to Lockhart. But of course they wouldn't like it. PS3 and the Blu Ray drive already cost them billions, subsidizing is no joke. But personally i think both Sony and MS go for 499.
I'm nobody
Member
I'm sure it will be worth every penny
thicc_girls_are_teh_best
Gold Member
5700XT is also a dedicated GPU card sold for high profit margins to PC gamers. And the price also includes the GDDR6, motherboard, PSU and cooling.
Consoles are getting their tech at a very different pricing thanks to bulk order discounting and long-term contract deals. Plus they are using customized APUs fusing the CPU and GPU onto the same die, which helps with costs (at the expense of using "mobile" CPU chips to keep TDP managed well).
The two aren't that comparable imo.
Stiflers Mom
Banned
I can wait for that 299 price point.
Clarissa
Banned
I don't know why but I started singing when I got to that "Let it go" part in your post.