The recent PlayStation 5 showcase climaxed with a rendered debut of the console’s final form factor – showcasing a somewhat controversial, and indeed gigantic design. But what nobody predicted was the reveal of PlayStation 5 consoles. Arriving alongside the standard model is a new digital edition, which is essentially the same but lacking the UHD Blu-ray drive. Crucially, Sony didn’t share pricing, with CEO Jim Ryan categorically shutting down the topic in a post-reveal interview with the BBC. We should expect an expensive console, but to what extent can the digital edition bring a more affordable machine to the market?
Let’s discuss the baseline costs first. Based on initial specs, I had high hopes that Sony would deliver PS5 at the same $399 price-point that served PS4 and PS4 Pro so well – but now I find that harder to believe. Xbox One X launched three years ago at $499. PS5 has more memory that’s more expensive to buy, its processor (though likely physically smaller) is using a more expensive fabrication process, the cooling is clearly more substantial and that’s before we factor in the SSD and a more advanced joypad, and a much larger case.
Costs reduce over time of course, but looking over the consumer electronics market as a whole over the last three years, prices seem to be static or even rising with new product launches. We’ve seen flagship smartphones break the $1000 barrier (and go higher, even) for example, while closer to home, the move to 7nm semiconductor fabrication did not deliver a disruptive impact to pricing in the PC graphics market: AMD’s RX 5700XT is comparable in some respects to PlayStation 5, it has less memory, and it still sells for $400.
Bloomberg has discussed the challenges facing Sony pricing-wise and they’re onerous, and that’s before we factor in Jim Ryan’s comments to the BBC, which seem to suggest that the platform holder wants to focus more on value rather than sticker price. Costs-wise, the economics look daunting, and delivering a $399 PlayStation 5 while doable, would involve Sony subsidising the machine substantially – more so, perhaps, than initially thought. Historically, huge subsidies haven’t worked out well. Between 2006 and 2008, Sony lost an astonishing $3.3bn in subsidising the price of PlayStation 3. PS4 addressed the balance with a relatively conservative design, but the next generation consoles are much more forward-looking and ambitious by comparison.
The PlayStation 5 digital edition gives Sony some latitude and the chances are it be a cheaper machine, and if the platform holder removes a component that represents so much value, it has to give some of that value back to the user in terms of sticker price. The alternative would be to double down on storage, and charge for the machine – and I’d argue that a premium SKU with fewer features than the main unit in any dimension would go down like a lead balloon. If the digital PS5 is to be a cheaper machine, this presents something of a problem: build cost will be essentially identical to the standard machine minus the cost of a UHD Blu-ray drive. Our understanding is that this component would only shave $20 or so from the BOM (bill of materials) meaning that apples to apples, Sony would lose more money by offering a discount any higher.