PlayStation 5: Price Increase?

Sony is planning to release its highly anticipated PlayStation 5 in the coming year, and as always the gaming community is excited to see what they have in store with this new model. Especially since this new edition to the PS series comes 6 years after the release of the PS4.

Unfortunately for consumers, it seems that Sony will have difficulty keeping their prices at the same level as in previous years. Sony consumers are used to spending about $399 on their consoles. As of right now the top model PS4 Pro is listed at $399.99 but is discounted in-store typically.

The problem is that Sony is using elements to their product that they haven’t used in previous years and that is driving up the unit cost of the PlayStation. The margins Sony operates within this industry are very low in the first place, so it’s not as if they are ballooning the price to get more money in their pocket either. For reference, the PS4 unit cost was about $380 which means they earned only $20 per unit which is a margin of just over 5%. Meanwhile, the PS5 looks to be in the range of $450 per unit. Making the device $470 if Sony keeps the same margins. But that may not be the best strategy for Sony.

Companies in this industry can easily overcome small margins or even operate at a loss since there are so many streams of revenue. This includes subscriptions such as PlayStation Plus, which is their online service to allow users to play online. Additionally, there are deals with software companies that can generate plenty of revenue. It’d be smart for Sony to stay near Microsoft in its pricing model. If the PlayStation is much more expensive than the Xbox, Sony risks losing their consumers to their biggest competitor. Which in turn, would decrease their subscriptions. So it is important for Sony to just keep as many people on their system as possible and not worry about a positive margin on their units

There is no doubt that Sony will do what they can to keep their console affordable. They have always tried to look after their consumers and keep the price at $400 and by taking care of their consumers, they’re strategically ensuring that Microsoft doesn’t advantageously steal their users. The price is definitely likely to increase but Sony must try to keep its price fair and competitive and $470 is far too much.

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