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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.
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 S20 product 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.
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
4k@ 60FPS should be a requirement for games
Hardcore COD players have to upgrade or else 
online
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What You Can Expect From the Next Generation of Gaming - Xbox Wire
The future of gaming has never been more inspiring. Creativity in games is flourishing. New services empower you to discover more games—and bring you closer to the games and creators and streamers you love. The cloud creates a massive opportunity to stream console-quality games and play with the...
news.xbox.com
What You Can Expect From the Next Generation of Gaming
The future of gaming has never been more inspiring. Creativity in games is flourishing. New services empower you to discover more games—and bring you closer to the games and creators and streamers you love. The cloud creates a massive opportunity to stream console-quality games and play with the people you want, wherever you want. And for many of us, nothing is more inspiring than the dawn of a new console generation.
We know you expect the next generation of consoles to set new standards in graphical power and processing speed, converging together in games that look incredible and feel alive. This will be defined by worlds that are visually astounding and immediately immersive, with innovative leaps in CPU, GPU and storage technology to give you frictionless access to new stories and new creators constantly.
We’ve been using Xbox Series X in our internal Takehome program and are energized by the feedback we’ve been receiving. At Xbox we value being open and transparent with you, and I’m proud to be able to share details about some of the technologies we are enabling for the next generation, and look forward to boldly sharing more as we head towards E3.
A superior balance of power and speed
Compared to the previous generation, Xbox Series X represents a superior balance of power and speed in console design, advancing on all technological fronts to delivering amazing, dynamic, living worlds and minimize any aspects that can take you out of the experience. Our job at Team Xbox is to give teams the tools they need to achieve their ambitions and tap into the console’s power with efficiency, a few of which we’re detailing today. Raw power is just part of the story:
- Next Generation Custom Processor: Xbox Series X is our most powerful console ever powered by our custom designed processor leveraging AMD’s latest Zen 2 and RDNA 2 architectures. Delivering four times the processing power of an Xbox One and enabling developers to leverage 12 TFLOPS of GPU (Graphics Processing Unit) performance – twice that of an Xbox One X and more than eight times the original Xbox One. Xbox Series X delivers a true generational leap in processing and graphics power with cutting edge techniques resulting in higher framerates, larger, more sophisticated game worlds, and an immersive experience unlike anything seen in console gaming.
- Variable Rate Shading (VRS): Our patented form of VRS empowers developers to more efficiently utilize the full power of the Xbox Series X. Rather than spending GPU cycles uniformly to every single pixel on the screen, they can prioritize individual effects on specific game characters or important environmental objects. This technique results in more stable frame rates and higher resolution, with no impact on the final image quality.
- Hardware-accelerated DirectX Raytracing: You can expect more dynamic and realistic environments powered by hardware-accelerated DirectX Raytracing – a first for console gaming. This means true-to-life lighting, accurate reflections and realistic acoustics in real time as you explore the game world.
The next console generation will be defined by more playing and less waiting. And when play begins, we know many gamers demand ultra-low latency to be as immersed and precise as possible. To this end, the team analyzed every step between player and game, from controller to console to display, and asked how we could make it faster.
- SSD Storage: With our next-generation SSD, nearly every aspect of playing games is improved. Game worlds are larger, more dynamic and load in a flash and fast travel is just that – fast.
- Quick Resume: The new Quick Resume feature lets you continue multiple games from a suspended state almost instantly, returning you to where you were and what you were doing, without waiting through long loading screens.
- Dynamic Latency Input (DLI): We’re optimizing latency in the player-to-console pipeline starting with our Xbox Wireless Controller, which leverages our high bandwidth, proprietary wireless communication protocol when connected to the console. With Dynamic Latency Input (DLI), a new feature which synchronizes input immediately with what is displayed, controls are even more precise and responsive.
- HDMI 2.1 Innovation: We’ve partnered with the HDMI forum and TV manufacturers to enable the best gaming experience through features such as Auto Low Latency Mode (ALLM) and Variable Refresh Rate (VRR). ALLM allows Xbox One and Xbox Series X to automatically set the connected display to its lowest latency mode. VRR synchronizes the display’s refresh rate to the game’s frame rate, maintaining smooth visuals without tearing. Ensuring minimal lag and the most responsive gaming experience.
- 120 fps Support: With support for up to 120 fps, Xbox Series X allows developers to exceed standard 60 fps output in favor of heightened realism or fast-paced action.
The benefits of the next console generation extend in every direction, bringing greater visual fidelity and improved loading speeds to your existing gaming legacy, in addition to new games. We’re continuing our commitment to compatibility with Xbox Series X and investing in technology that makes game ownership easier across generations.
- Four generations of gaming: Our commitment to compatibility means existing Xbox One games, including backward-compatible Xbox 360 and original Xbox games, look and play better than ever before. Your favorite games, including titles in Xbox Game Pass, benefit from steadier framerates, faster load times and improved resolution and visual fidelity – all with no developer work required. Your Xbox One gaming accessories also come forward with you.
- Smart Delivery: This technology empowers you to buy a game once and know that – whether you are playing it on Xbox One or Xbox Series X – you are getting the right version of that game on whatever Xbox you’re playing on. We’re making the commitment to use Smart Delivery on all our exclusive Xbox Game Studios titles, including Halo Infinite, ensuring you only have to purchase a title once in order to play the best available version for whichever Xbox console they choose to play on. This technology is available for all developers and publishers, and they can choose to use it for titles that will be release on Xbox One first and come to the Xbox Series X later.
- Xbox Game Pass: In addition to games from across four generations of consoles, our leading game subscription service, Xbox Game Pass, will continue to have our first party games, like Halo Infinite, included at their launch. We look forward to millions of you experiencing the Xbox Game Pass portfolio and immersing yourselves in a deep library of high-quality games, playing those you love now and also discovering your next great adventure.
Xbox Series X is our fastest, most powerful console ever, designed for a console generation that has you at its center. This means a high-fidelity gaming experience enclosed in a quiet and bold design, with the ability to discover thousands of games across four generations, all with more playing and less waiting.
Whether it’s empowering amazing creators at our 15 Xbox Game Studios, fueling game discovery with Xbox Game Pass, or expanding what and where you can play with Project xCloud, Team Xbox stands for frictionless pathways between players and the best experiences our remarkable art form has to offer. Xbox Series X represents that same commitment for players who want immediate immersion in games that also look and feel better than ever.
We can’t wait to share more details about the new Xbox with you in the coming months.
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I like specs. Specs are nice. I'm going to need to see some games before I start getting excited for this system. I can't remember the last time I powered up The1. Shit I play my 360 more often.
same here!