Three years after the PlayStation 3 launched, Sony dropped the price of its most popular model by another $100. It was the second such price cut to that point. Two years into its lifespan, the PlayStation 4 dropped by $50.
Barely two years into the PlayStation 5’s reign, Sony has announced that the price of its hard-to-find console is going up. Like the PlayStation 3 and PS4, there are different circumstances and different powers in charge leading to this unusual move. But the price hike is hitting every market except the United States. So while American buyers probably shouldn’t expect a $50, much less $100, discount once the PS5 turns two, or maybe even three years old, should they also expect to get dragged into a situation involving supply chains, currency values, and investor anxieties ?
Daniel Ahmad, a senior analyst based in for the Shanghai-based games research firm Niko Partners, isn’t so sure. “A price increase in the US is unlikely given the strength of the US dollar,” against other currencies, and that most likely drove the initial MSRP increase. It hit Europe, where the dollar and Euro are 1:1 for the first time in 20 years, for €50 more; touched the UK (where the pound is the lowest against the dollar it has been since 1985) for £30 more; and tagged Japan for another ¥5,500 yen.
In an email to Polygon, Ahmad noted that the United States is the largest console market, and one of the most competitive, which makes a price increase there riskier. But another industry analyst very familiar to the gaming public, Michael Pachter of Wedbush Securities, is somewhat more pessimistic on behalf of consumers.
“If they have a chance to raise price in the US, [Sony] probably will do so, but raising price is SUCH a dumb idea,” Pachter said in an email. “I’m hopeful they learn their lesson and keep it limited to the other markets.”
As for why Sony would go along with something consumers wouldn’t want (to say nothing of the fact he considers it a bad move) Pachter noted that Sony’s earlier decisions to price games at $70 and bail out of E3 activities (before COVID canceled them ) are moves that also alienate consumers, but Sony seems able to make them without taking much punishment near term. The simple fact is that demand for the PlayStation 5 remains very high, even when consumers are paying more than the shelf price to snare a bundled console, or a new one from a secondary market.
“We continue to see high demand for the PlayStation 5 in all markets we analyze and we anticipate, should supply conditions improve,” Ahmad said, “that Sony will still be able to meet their unit sale targets despite the price increase given demand still outweighs supply.” The price hike in the non-US territories, he speculated, was likely done “to keep hardware profitability stable and hit targets set for the [fiscal year].”
Ahmad noted that while Sony told investors a year ago that it no longer sells the disc-drive PS5 model at a profit, its disc-less digital-only unit is still being sold at a loss. “It’s likely that Sony increased the price of the console to keep hardware profitability stable and hit targets set for the [fiscal year],” Ahmad added.
Pachter competed in part. “They had planned to be profitable by now [on the PS5] so were on track, but I presume they are making less than they planned for, so they decided to shift the burden to consumers,” Pachter said.
And getting back to satisfying white hot demand, which either keeps a price hike in the US at bay, and might bring them back down elsewhere, the console’s design may yet stand in the way of stabilizing the supply chain. “Sony and Nintendo designed their consoles to use proprietary chips for mundane functions like Bluetooth,” Pachter said, “and the supply chain hit them harder because they couldn’t substitute many of these chips.”
The fact the price increase affects every market but the US seems to acknowledge Sony sees a very competitive market there, where Microsoft hasn’t battled the same kind of supply issues (but, of course, hasn’t sold as many units, either) . Bleeding US customers for another $50 on the PS5 likely wouldn’t affect its demand that much, Pachter said.
But it would send another message to households about the value of a pricier console, with its own subscription to manage, and an Xbox Series X with Game Pass as an option. It would be “one more reason to sign up for Game Pass instead of buying a PS5,” Pachter said, “and the timing is questionable.”