Sony struggling with PlayStation 5 price due to costly parts

  • Sony struggling with PlayStation 5 price due to costly parts

Sony struggling with PlayStation 5 price due to costly parts

The estimated manufacturing cost of one PS5 is around $450 when taking these components into account.

At launch, PlayStation 4's manufacturing cost was believed to be around $381. If all things were similar with the PlayStation 5, Sony would have to have the PS5's price "be at least $470" to reach similar gross margin. With the upcoming Xbox Series X expected to release in the same window, Sony has tough choices to make for the PlayStation 5's price tag. The other alternative for Sony is to book a loss on each console sold, recouping the money through services, like the PlayStation Plus subscription that is effectively mandatory these days given the online-only nature of most games. However, sources claim that Sony is split on whether it should sell the console at a loss, if necessary, to match the Xbox Series X or find a way to make the PS5 profitable as it is. Sony is also paying an "unusually expensive" amount per unit for the PS5's cooling system to ensure machines do not suffer from overheating.

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. This includes the cooling system, which usually doesn't cost much but Sony chose to spend more in order to make sure that heat dissipation won't be an issue for the new console. It's worth noting that the ongoing Coronavirus outbreak has had no impact on PlayStation 5's production preparations.

Outside of PlayStation 5, Bloomberg reports that Sony Interactive Entertainment also plans to release a new version of PlayStation VR sometime after PlayStation 5 goes on sale.

According to Bloomberg, however, Sony executives expect a longer transition into next gen; with over 100 million PS4 units sold, Sony will also be launching many new titles across both the old and new platforms.

Bloomberg also notes that numerous games launched for PlayStation 5 will also be available to play on the PlayStation 4.

There is reportedly pressure from Sony Corporation CFO Hiroki Totoki to provide more transparency and information in the lead-up to PlayStation 5's launch this holiday season, which has led to some internal distress.

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 past year.