Hardware Supply Issues May Mean Sony Has to Sell the PlayStation 5 At a Loss

[GTPNewsWire]

This is the discussion thread for a recent post on GTPlanet:

Hardware Supply Issues May Mean Sony Has to Sell the PlayStation 5 At a Loss

This article was published by Andrew Evans (@Famine) on February 14th, 2020 in the Hardware category.

 

[Enosigephs]

Console's hardware periodically have lower costs so in depth of time the company will gain the desired profit.Same thing happened to ps3 (bluray and cell tech),but at the end Sony was the winner.Bring it on,people!!I am sorry for any wrong use of language,Greek here!

 

[Kiki_Haoru]

This is a recurrent issue for new consoles. This can also mean that the first gen consoles subare more likely to be subject to reliability issues, as the manufacturer will look for savings wherever they can while the supply and production chain is running at a loss.

 

[Rotorist]

Let me just say that just the GPU chip in the APU die will have more than the horsepower of RTX2080Super that costs over $700 by itself. If we add all the components, PS5 production cost is valued at least $600 without taxes and profits. So, it should be sold at least for $800 to allow a small profit to Sony. In order to sell well though, Sony could sell it at a loss for $700 and wait to get the profits from the games that have big profit margins on consoles.

 

[Strittan]

All consoles are usually sold at a loss at launch. I thought this was common knowledge, especially if you’re into gaming, and ESPECIALLY if you’re running a gaming site?

 

[GlamFM]

Let me just say that just the GPU chip in the APU die will have more than the horsepower of RTX2080Super that costs over $700 by itself. If we add all the components, PS5 production cost is valued at least $600 without taxes and profits. So, it should be sold at least for $800 to allow a small profit to Sony. In order to sell well though, Sony could sell it at a loss for $700 and wait to get the profits from the games that have big profit margins on consoles.

You’re comparing apples and oranges.

Retail prices have nothing to do with whatever Sony pays for parts.

 

[Daz555]

Let me just say that just the GPU chip in the APU die will have more than the horsepower of RTX2080Super that costs over $700 by itself. If we add all the components, PS5 production cost is valued at least $600 without taxes and profits. So, it should be sold at least for $800 to allow a small profit to Sony. In order to sell well though, Sony could sell it at a loss for $700 and wait to get the profits from the games that have big profit margins on consoles.

If it's $700, it's dead in the water.

Consoles being sold for a loss at launch is fairly common as far as I'm aware.

 

[samdu]

I've expected $499 from the get-go. If it's less than that, I'll be both happy and surprised. But considering the tech that's to be in it, $499 seems right.

 

[Famine]

All consoles are usually sold at a loss at launch. I thought this was common knowledge, especially if you’re into gaming, and ESPECIALLY if you’re running a gaming site?

PS4's initial manufacturing costs were estimated at $380, against a $399.99 launch price. PS3, on the other hand, cost almost $600 to make, for a $500 launch price (and earlier, 2006 models were even worse).

Also, article has words in.

Generally speaking, console hardware itself isn’t where the money is in gaming. Instead Sony will make money on its first-party title sales — one of which is rumored to be Gran Turismo’s next title — and licensing, along with PS Plus subscriptions. Fine margins, and even losses, are the norm, but a $50 loss on each console is likely to be hard to stomach. However PS5’s backwards compatibility may mean that continued PS4 game sales will offset that.

 

[RaceFuchs]

499 is the sweet spot here and nobody should complain. If this console is going to be as powerful as people are expecting, 499 will offer incredible value. Anything below that will worry me a bit. That pretty much means compromises, and i dont think we want a next gen console with compromises.

 

[opelgt1969]

One TB SSD is even more stupid than launching the PS4 with only 1 TB HD. Launch should at least be 3 TB. I'm only guessing but I think some PS5 games will be hitting at least 200 GB without the updates after 2 week launch date.

 

[zzz_pt]

One TB SSD is even more stupid than launching the PS4 with only 1 TB HD. Launch should at least be 3 TB. I'm only guessing but I think some PS5 games will be hitting at least 200 GB without the updates after 2 week launch date.

Didn't Sony file a patent for a system of swappable SSD storage, much like the memory cards in the first 2 generations?

 

[RolexGTP]

Hey that's good news for xbox lol

 

[zzz_pt]

Hey that's good news for xbox lol

Hmmmm... XB uses the same components / materials as the PS. The market affects everyone.

 

[Robin]

The launch 60GB PS3's were estimated to have cost $840 to manufacture against a $600 price.

Since the recession they don't like the loss margin to be too high which is why the PS4 was designed to be relatively cheap so they could sell it cheap. Worked out well for them and it was always pretty much expected that the PS5 would follow the same formula.

 

[opelgt1969]

Didn't Sony file a patent for a system of swappable SSD storage, much like the memory cards in the first 2 generations?

Add up your PS4 game storage (If you plan on playing them on the PS5) and I'd bet you won't have any room for any new PS5 games. Launching with a one TB HD is like trying to sell a new Corvette with a 4 banger engine ,looks pretty but no ump.

 

[zzz_pt]

Add up your PS4 game storage (If you plan on playing them on the PS5) and I'd bet you won't have any room for any new PS5 games. Launching with a one TB HD is like trying to sell a new Corvette with a 4 banger engine ,looks pretty but no ump.

I don't usually keep my saves when I'm done with a game. The only games I didn't uninstall were GTSport, Bloodborne and DarkSouls 3.

All the others, I delete when I finish them. But I understand if people want to keep their games ready to go, like on PC, it would be better to have a larger SSD. For those people, who I guess are a minority, expandable storage is always an option.

In the PS4, I think some people even prefer running the games from the external hard-drive (because it's faster than the one inside the box).

 

[ZedNinetySix]

I genuinely feel sorry for Soney, it will be another tough start for them, clearly they don't want to move an inch from the $400 sales price. But it's good to know that the money put into each unit is legitimately good value for hardware and not inflated.

Hopefully though as more units are produced, costs in manufacturing go down soon after aswell.

It will a tough start for them, but I have no doubt it will ultimately result in a success, aswell as a finacial success later onwards.

 

[Slapped]

Wasn't this pretty much always the case for a PS - at least at launch?

Consoles are like printers - you sell the big hardware at a loss but make up for it in consumable (software in the case of consoles) sales.

 

[Tired Tyres]

Let me just say that just the GPU chip in the APU die will have more than the horsepower of RTX2080Super that costs over $700 by itself. If we add all the components, PS5 production cost is valued at least $600 without taxes and profits. So, it should be sold at least for $800 to allow a small profit to Sony. In order to sell well though, Sony could sell it at a loss for $700 and wait to get the profits from the games that have big profit margins on consoles.

Retail to you or me mate. What Sony pay would be fundamentally different. I used to work in PC sales and something I would sell for £250 cost my company between £17-20 plus VAT. What Sony can do with bulk buying and a technical partnership with AMD is much greater. I don't buy the 450 number for even one second.

 

[CBH]

Consoles are like printers - you sell the big hardware at a loss but make up for it in consumable (software in the case of consoles) sales.[/QUOTE]
Good point.

 

[Famine]

Wasn't this pretty much always the case for a PS - at least at launch?

Not for PS4, which made a small profit, but definitely for PS3 which made enormous losses on each unit.

I don't think anyone wants another PS3 situation - although that console had its own further issues.

Consoles are like printers - you sell the big hardware at a loss but make up for it in consumable (software in the case of consoles) sales.

That's covered in the article. First-party software (and paid DLCs), third-party licensing, and of course PS+.

 

[evldave333]

One TB SSD is even more stupid than launching the PS4 with only 1 TB HD. Launch should at least be 3 TB. I'm only guessing but I think some PS5 games will be hitting at least 200 GB without the updates after 2 week launch date.

Not too worried about the 1tb ssd drive they've already stated you can be very selective about what you download this time out, no more multiplayer online guff for me lol... Also I will be keeping my ps4 pro so the memory will be for newer titles only... The backwards compatibility will be nice mainly for slow loading ps4 titles, but realistically when a new generation arrives the older games gather dust. Im hoping (although its unlikely) that there will be a killer app like GT7 at launch otherwise PS5 can come to the boil before I buy it.

 

[Gr8_Lakes]

Last I read the number of PlayStation Plus subscribers was around 36.3 million. And hardware for those memberships cost? Sure, there’s costs associated with maintaining a network. But I bet Sony could give away consoles and still make money on games and memberships alone.

 

[ShakesMcQueen]

One TB SSD is even more stupid than launching the PS4 with only 1 TB HD. Launch should at least be 3 TB. I'm only guessing but I think some PS5 games will be hitting at least 200 GB without the updates after 2 week launch date.

I'll go ahead and predict a 0% chance of a 3TB SSD in either console, right now. You can consider this me planting a flag in that particular hill.

You're getting, at most, 1TB internal. Probably with some sort of add-on expansion option.

 

[GTV0819]

All consoles are usually sold at a loss at launch. I thought this was common knowledge, especially if you’re into gaming, and ESPECIALLY if you’re running a gaming site?

Yeah but this one needed an article.

 

[AlanH49]

Not for PS4, which made a small profit, but definitely for PS3 which made enormous losses on each unit.

I don't think anyone wants another PS3 situation - although that console had its own further issues.

That's covered in the article. First-party software (and paid DLCs), third-party licensing, and of course PS+.

ZhugeEX, an analyst, confirmed PS4 sold at a small loss during it’s launch window (6-12 months).

But we’re now in a different world. Revenue from PSN will continue undiminished with PS4 & PS5 software. While PS+ will continue to bring in revenue from 35m-40m users.

It’s easier to take an upfront loss.

 

[Corsa]

People wanting 3TB SSD on a console. I just put an 860 evo in my rig (1TB) $150.

I was looking at 3.8s prices are significant starting around $500 up to $1500 just for the drive.

 

[ShakesMcQueen]

Yeah but this one needed an article.

The Bloomberg article's main thrust didn't even really have to do with whether they'd have to sell it at a loss. It was that Sony were having trouble keeping costs for materials down where they had hoped, due to increased demand for NAND, which may necessitate a higher price. I don't know why GTP opted for that headline.

Some people were holding out hope that the PS5 might be $399 like the PS4. However, a $450 BOM means that is very, very unlikely, because the total cost of the console will be well over $500 once you factor in R&D, manufacturing, marketing, and shipping, on top of the raw components.

Sony would probably prefer to sell the console at $499, and take the same small initial loss they did with the PS4. However, it also sounds like their strategy is going to depend on what Microsoft do with the Xbox Series X - Sony may opt to take a bigger loss to stay competitive on price.

Don't expect the kind of deep early losses Sony accepted with consoles like the PS3 to return, however. Those were the days of exotic, highly customized hardware - not the more standard x86 boxes we have now.

All of this is ultimately just noise, because we are probably still about four months away from hearing a price for either console anyway.

 

[GTV0819]

The Bloomberg article's main thrust didn't even really have to do with whether they'd have to sell it at a loss. It was that Sony were having trouble keeping costs for materials down where they had hoped, due to increased demand for NAND, which may necessitate a higher price. I don't know why GTP opted for that headline.

Some people were holding out hope that the PS5 might be $399 like the PS4. However, a $450 BOM means that is very, very unlikely, because the total cost of the console will be well over $500 once you factor in R&D, manufacturing, marketing, and shipping, on top of the raw components.

Sony would probably prefer to sell the console at $499, and take the same small initial loss they did with the PS4. However, it also sounds like their strategy is going to depend on what Microsoft do with the Xbox Series X - Sony may opt to take a bigger loss to stay competitive on price.

Don't expect the kind of deep early losses Sony accepted with consoles like the PS3 to return, however. Those were the days of exotic, highly customized hardware - not the more standard x86 boxes we have now.

All of this is ultimately just noise, because we are probably still about four months away from hearing a price for either console anyway.

Okay. But we all know the PS4 is 6 years old already. So I think it's only normal if acquisition cost becomes lower as time passes by.