Report: Component Shortages Will Push Up PlayStation 5 to "Around $450"

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PlayStation owners might have to spend more than expected on the PlayStation 5. Bloomberg reported yesterday that it costs Sony about $450 to manufacture each unit of the next-gen console. The company may have to set the PS5's retail price at nearly $500 to make even a little bit of profit on each unit.

Bloomberg's sources attributed those steep manufacturing costs to a scarcity of components. That comes as a bit of a surprise, though, especially since the report claimed Sony's having the most trouble securing NAND and DRAM at reasonable prices. That's despite the memory market having oversupply issues for all of 2019.

Yet we already knew that NAND and DRAM prices were expected to rise in 2020. DRAMeXchange said in December 2019 that the introduction of the PS5 and Xbox Series X would lead to price increases for graphics DRAM this year. NAND prices are also predicted to rise in 2020, although that's for a greater variety of reasons.

Not that memory will be the only expensive part of the PS5. Bloomberg said the console's cooling system also costs more than usual "at a few dollars per unit" because Sony "opted to lavish more on making sure heat dissipation from the powerful chips housed inside the console isn't an issue."

The referenced chips include an AMD Ryzen processor as well as Navi graphics. Sony also equipped the PS5 with an SSD, too, which is a first for the company. Those improved specs will offer better performance than the PlayStation 4 Pro, which retails at $400.

Spending roughly $500 on the next-gen PlayStation would've seemed ludicrous a decade ago; now it only seems plausible because of the PS4 Pro's price. Owning the latest-and-greatest console is becoming ever more costly.

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Gaming

9 Comments Comment from the forums

Dark Lord of Tech

Component shortages ... LOL
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insemnia

I'm confused, why is the price at 450-500 outlandish? People keep quoting that it's insane for a console to cost this much. Do I want it cheaper? Yes I do. Am I surprised that top of the line consoles cost 400-500? No.

PS3 launched at $600 for a non-pro 60gb hard drive. And most people were spending well over $1000 to have it that holiday season.
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bit_user

Spending roughly $500 on the next-gen PlayStation would've seemed ludicrous a decade ago; now it only seems plausible because of the PS4 Pro's price. Owning the latest-and-greatest console is becoming ever more costly.
You have no idea what you're talking about, Mott.

The PS3 launched at $600 for the 60 GB version. The 20 GB version was only $100 less.

https://en.wikipedia.org/wiki/PlayStation_3_models

Going back into the late 90's, the 3DO retailed at an even higher price point.

https://en.wikipedia.org/wiki/The_3DO_Company
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cryoburner

PlayStation owners might have to spend more than expected on the PlayStation 5. Bloomberg reported yesterday that it costs Sony about $450 to manufacture each unit of the next-gen console. The company may have to set the PS5's retail price at nearly $500 to make even a little bit of profit on each unit.
The consoles themselves generally don't bring in much money, if any at all, for the company selling them, at least at launch. Oftentimes consoles will be priced at cost, or even below what it takes to manufacture them, with the actual profits made from things like game licensing and distribution, online services and peripherals. The console hardware itself doesn't necessarily need to be profitable.

Even if they were to take a loss of $50 for each console sold at launch, they immediately make that back with a year subscription to access online multiplayer, which costs them relatively little to host. Over the course of the 7+ years that these launch-buyers may keep the console for, they are likely to spend over $400 for online services alone, and that's before we get to the manufacturer's cut of game sales or things like additional controllers, so it can potentially be worth losing a bit of money on each console to get their foot in the door and make their customers less likely to go with the competition instead.

And even if it does end up being $500, as Insemnia pointed out, that's a relatively normal launch price for a console, especially if we figure in inflation. Here's what launch models of some popular consoles cost in the US, with their approximate prices adjusted for inflation in parenthesis...

PlayStation: $300 ($522)
PlayStation 2: $300 ($450)
PlayStation 3 20GB: $500 ($640)
PlayStation 3 60GB: $600 ($768)
PlayStation 4: $400 ($443)

Xbox: $300 ($437)
Xbox 360 20GB: $400 ($528)
Xbox 360 Core: $300 ($396)
Xbox One: $500 ($554)

NES: $180 ($432)
SNES: $200 ($379)
Nintendo 64: $200 ($329)
Gamecube: $200 ($291)
Wii: $250 ($320)
Wii U 8GB: $300 ($337)
Wii U 32GB: $350 ($393)
Switch: $300 ($316)

If we look at the adjusted prices, we see that all of the primary versions of consoles from Microsoft and Sony have been priced roughly around the $450-$550 range, aside from the PS3, which went well above that. Only the XBox 360 Core was priced around $400 in today's money, and that was the cut-down version with no user-accessible storage, a wired controller, and only a standard definition video cable included, and the buyer was pretty much required to purchase a drive for it down the line. $400 in today's money would work out to be less expensive than any other console Sony has released at the launch of a new generation, so one shouldn't be surprised if the price ends up higher.

Something else worth pointing out about this pricing though, is that the original Xbox cost a lot more to manufacture than its sale price. The Xbox supposedly cost more than $400 to build at launch, yet it sold for just $300, meaning Microsoft lost over $100 on each console sold. Then, they cut the price further to just $200 after only about 6 months on the market, matching a price cut for the PS2. In all, Microsoft lost somewhere around $4 billion on the original Xbox. They did establish themselves in the market though, and the Xbox 360 ended up faring better.
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Chung Leong

insemnia said:
I'm confused, why is the price at 450-500 outlandish? People keep quoting that it's insane for a console to cost this much.

People who write about PC tech all day are liable to regard deflation as the norm, I guess. A $500 console is roughly where the last gen was in terms of purchasing power. On the other hand, the same money can get you a pretty decent laptop these days, whereas $400 a decade ago would only get you something at the entry level. I don't think $300 could buy you anything at the time of the Xbox 360. And what PC tech could we get back in the 80's for the price of the NES? Maybe a couple RAM chips? A print port card?
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spongiemaster

Chung Leong said:
And what PC tech could we get back in the 80's for the price of the NES? Maybe a couple RAM chips? A print port card?

You could get a font cartridge for your printer for about $150-$200. There are some old computer shows on TV from the 80's on Youtube. A guy was reviewing a printer in one of them and noted how a 6 pack of fonts for the printer was only about $800, and that's not adjusted for inflation.
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cryoburner

Chung Leong said:
On the other hand, the same money can get you a pretty decent laptop these days, whereas $400 a decade ago would only get you something at the entry level.
That's probably at least partly due to laptops being somewhat less in demand, once smartphones and tablets became more popular. With increased competition from those devices for mobile computing, the laptop manufacturers likely can't charge as much of a premium for mid-range devices. It's also arguable that laptop performance isn't improving as quickly as it once did, and even older laptops can handle most everyday tasks pretty well, so people see less need to buy a new one as often.
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bit_user

cryoburner said:
Here's what launch models of some popular consoles cost in the US, with their approximate prices adjusted for inflation in parenthesis...
Thanks. That was very informative.

cryoburner said:
The Xbox supposedly cost more than $400 to build at launch, yet it sold for just $300, meaning Microsoft lost over $100 on each console sold.
As you point out, that was a special case of them trying to break into an established market. I don't expect we'll see quite the same degree of subsidization.
Reply
bit_user

Chung Leong said:
People who write about PC tech all day are liable to regard deflation as the norm, I guess. A $500 console is roughly where the last gen was in terms of purchasing power.
Interesting point.

Chung Leong said:
I don't think $300 could buy you anything at the time of the Xbox 360.
I think one reason people were interested in trying to use XBox 360 and PS3 as PCs was precisely because they were cheaper than PCs available at the time.

Sony even supported this, for a while.

Chung Leong said:
And what PC tech could we get back in the 80's for the price of the NES? Maybe a couple RAM chips? A print port card?
It's a little before my time, but there were entry-level computers that used a TV as a display, such as Apple II, Commodore 64, a couple Atari models, Texas Instruments, Tandy, etc. According to this, C64's price bracket started just above the NES, at least at times.

https://en.wikipedia.org/wiki/Commodore_64#1984–1987
Interestingly, its CPU seems to be a relative of the one used in the NES. Also, I didn't realize the NES had so little RAM (a mere 2 kB of main memory, though cartridges often contained much more):

https://en.wikipedia.org/wiki/Nintendo_Entertainment_System#Technical_specifications
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