Sony Took a Loss on Each of the 4.5 Million PS5s it Sold in 2020
Surprised? Nah
Although Microsoft and Sony may have launched consoles in roughly the same timeframe, and the Xbox Series X is technically the more powerful console, Sony's pulling ahead in the sales figures. In 2020, the company sold a mighty 4.5 million units, which is an impressive accomplishment if you consider that the console was only out for a month and a half before the year was up. It's unclear where the tally stands now, but it will likely be double that soon enough.
However, despite these surprisingly high sales figures, Sony isn't making any money on them. In fact, Sony is taking a loss. The company's earnings documents show that sony has two issues with the PS5 regarding the financials.
The most notable is that the company is taking a "loss resulting from strategic price points for PS5 hardware that were set lower than the manufacturing costs." Next to that, Sony also had higher costs for selling, general, and administrative expenses related to the launch that it had anticipated.
Was a Loss Really Necessary?
Of course, taking a loss on console hardware, especially early in their lifecycle, is nothing new. In fact, it would be surprising if Sony wasn't making a loss. It's a common strategy to price the console hardware low in order to obtain mass adoption, which in turn leads to higher sales of PS5 games and PlayStation Plus subscriptions — because that's where the money is made.
Yet, despite all that, I feel the elephant in the room does need to be addressed: Did Sony really need to make a loss?
The PS5, along with practically every other bit of gaming-related hardware, is currently in short supply, and scalping isn't an uncommon practise. We're still seeing PS5 consoles being sold for well over twice their $499 (disc edition) and $399 (digital edition) MSRPs by scalpers — profiteers who buy the consoles in masses at retail MSRP prices and then sell them for far higher figures because they're out of stock everywhere. And people are willing to pay these prices.
Part of me would rather have seen a two-step pricing model. Give us a higher price today, with the promise of lower prices a year from now. I'd rather people put more money into Sony's pockets than the scalpers' (and eBay's) wallets. At least Sony is the company actually making the product.
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Could Sony Not Just Have Built More?
Not really. Nobody could see this pandemic coming, and the resulting extreme demand from it. Sony's PS5 contains AMD hardware, which is manufactured by foundry TSMC — and TSMC is fully at capacity and cannot turn out any more chips. Considering that TSMC also makes the Xbox Series X's hardware, along with CPUs and GPUs for AMD, and lots of chips in the mobile and automotive space... there's not much capacity left to go around.
And by "not much" we mean there's zero capacity. TSMC is literally selling every wafer it can possibly make, at premium prices. TSMC is investing billions into new chip foundries around the world, anticipating even higher demand for its services in the coming years. However, each new fab takes years to build, so it will be a while before fabless companies (like AMD, Nvidia, Apple, and more) can start getting more wafers.
For more details, check out our full PlayStation 5 review.
Niels Broekhuijsen is a Contributing Writer for Tom's Hardware US. He reviews cases, water cooling and pc builds.
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Colif As did all the people who bought them off scalpers in the same time period.Reply
Not many actual gamers got them for right price. -
hotaru.hino Not surprising. Sony's strategy has always been sell the hardware at a loss, make it up with software and other services.Reply -
Math Geek that's not just sony, but every console. there is never any money in the console itself. the money is in everything else that goes with it. mostly licensing and now their cut of store/dlc purchases.Reply
whole new place to cash out with the digital store becoming so big. -
Phaaze88 Yeah, they did it with the intention to make it back through digital sales.Reply
But if scalpers are hoarding them, that's not helping Sony nor Microsoft's digital sales.
Why the companies aren't throwing up pitchforks, I've no idea... -
Heat_Fan89 Reply
Correct and all it did was sour gamers on this generation of consoles who otherwise would have bought games to go with their consoles. There were several articles by the gaming press saying that game sales are down. Selling consoles to non-gamers is bad for business. At least Microsoft has Game Pass to soften the lack of game sales. This launch has been a disaster for both companies and I have been buying consoles at launch since the Sega Dreamcast and PS2. This time I have purchased neither because I refuse to encourage/support the black market.Colif said:As did all the people who bought them off scalpers in the same time period.
Not many actual gamers got them for right price.
Besides the general consensus amongst gamers has been that the launch lineup is disappointing for both consoles and this was reinforced by a Gamestop employee I spoke to recently. -
Heat_Fan89 Reply
This problem could have been avoided if retailers had used Captcha or Sony and Microsoft decided to sell their consoles first through their portals i.e. Microsoft Store and PSN Store. They could have required a gamertag or userid and served those with priority based on seniority first. They also could have put in place a system like Apple does when they release a new iPhone i.e. if it's not in stock, you can order it and we'll put you on the waiting list but YOU WILL get one. That would cut down on the impulse buying and going to a scalper.Phaaze88 said:Yeah, they did it with the intention to make it back through digital sales.
But if scalpers are hoarding them, that's not helping Sony nor Microsoft's digital sales.
Why the companies aren't throwing up pitchforks, I've no idea...
None of these suggestions would eliminate scalping but it would cutdown on the practice and get more consoles into the hands of legitimate gamers. -
Phaaze88 @Heat_Fan89Retailers didn't, and so people found out the hard way where most retailer's interests lie. Some of these retailers have been running long outdated security and OSs for years.Reply
Also, some people just plain suck/dumb. Giving in to the scalpers just exacerbates the problem further.
No, "I've got the money, so what", isn't a valid excuse. They've enhanced the livelihood of people doing it, and encouraged more to do it.
Those 2 cons over the 1 pro(I got it now), isn't a 'win'. They've succeeded in screwing themselves and others with more difficult future purchases. -
CerianK "I'd rather people put more money into Sony's pockets than the scalpers' (and eBay's) wallets."Reply
That is pretty much what I said about AMD and nVidia here.There seems to be something horribly wrong with how some big-tech manages its marketing.
It could be done in a way that makes more sense, and I think people would accept that. -
thepersonwithaface45 One of my co-workers got one from sony direct, didn't get it by the date they said it would be there, filed a "lost or stolen" ticket and they ended up sending him 2 ps5's.Reply
He sent the 2nd one back, due to fear of sony bricking the "stolen" ones, much to my annoyance because I wanted to buy it haha. I did get one from walmart for my dad, but still wanted one for me.
Eitherway, I don't think the logistics were too good on sony's part. -
hotaru.hino Reply
I think Nintendo's the only company who manages to either break even or make a profit on day one on their hardware.Math Geek said:that's not just sony, but every console. there is never any money in the console itself. the money is in everything else that goes with it. mostly licensing and now their cut of store/dlc purchases.
whole new place to cash out with the digital store becoming so big.