I’ve said it before and I’ll say it again, the most important number attached to any console has nothing to do with resolution, framerate, teraflops, RAM, storage or anything else. It’s price, pure and simple: all of those other stats only matter as a function of price. You can already pay $5,000 to get an insanely powerful PC, but that’s not the point of a console. And right now, that’s my main question about PS5 and Xbox Series X.
Yesterday, Paul Tassi wrote an article about the perfect price for the Xbox Series X, which he pegged at $500: not too high, not too low. The same launch price as the Xbox One X and a price that would clearly position the Series X as a premium machine, along with its girth.
So here’s what I think the perfect price for the PS4 is, actually, $500, or $499. But with one major caveat.
I imagine Sony would ideally like to go lower: a recent report from Bloomberg suggests that the company is struggling to bring the build cost of the PS5 below $450, which would indicate a retail price of around $500. Sony sold the PS4 at a loss on day one, with a $399 price tag that didn’t quite cover the $381 build cost plus additional cost. Selling the PS5 at $499 after a $450 build would be a slightly better margin than that.
The big wildcard here is, course, Microsoft. If both the Xbox Series X and the PlayStation 5 come in at $499, Sony still gains a major advantage because PS4 games will work on PS5, meaning that anyone jumping ship from PlayStation to Xbox wouldn’t be able to bring the games forward to the new machine. It should allow Sony to leverage its current market lead into the next generation, all other things being equal.
Sony could ensure a price edge by going as low as $399, but dropping it that low would be unnecessary if Xbox Series X is not also that low, making for unnecessary loss.
So if both of these consoles come in with the same price tag, Sony still wins, which is why $500 is still the ideal price for the PS5, assuming Series X is $500 as well. If Microsoft uses the financial flexibility that comes with being one of the largest tech companies on Earth to take a more significant loss, however? That could cause Sony some trouble.
Nothing seems set in stone. In the past, Sony has strongly hinted that it would very much like to wait and try to one-up Microsoft in terms of price again, and this report also indicates that the company is taking a “wait and see” approach towards pricing. The $100 price differential between Xbox One and PS4 worked wonders for Sony in last generation, but Xbox One’s high price was the result of the bundled Kinect 2.0. Without a weird peripheral muddying the waters, it seems likely that the only way Sony is going to get much lower is to take a significant loss.
There are reasons to think that a loss would be more feasible this generation. This was, for many, the generation where consoles went fully digital, and that means PSN spending has been soaring alongside major growth in subscription services. A console is now a lot better at generating revenue outside of the initial purchase, potentially offsetting a higher loss on day one.
These have to be the conversations going on at Sony: how much of a loss is feasible in order to maintain its position as clear-cut market leader?
Historically speaking, there’s no greater hurdle for a new console to overcome than a too-high price tag, especially in the face of competition. And so that’s the essential trouble that Sony will run in to here: people have certain expectations of a console generation in terms of both price and power increase, and it might be difficult to hit both at once. The real question is what Sony can feasibly make off of the average console through PSN and subscriptions, and what sort of a loss that it will be able to justify come sale time.
