A new report recently revealed that the bill of materials for the PS6 is — allegedly — around $960, increasing by $200 in the last couple of months alone. And with the price of RAM and storage, in particular, expected to increase substantially over the course of the next year, which will result in another PS5 price increase, the expectation is that this bill of materials is going to soar past $1000. This is why the aforementioned report alleges the best-case scenario, if PlayStation fans are lucky, is that a discless PS6 will launch at $1000. This looks in doubt now, though, based on recent comments from Sony.
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In a recent earnings call with investors, Sony acknowledged that hardware prices are going to be a substantial struggle for the foreseeable future due to increasing prices in competition for increasingly rare components. In other words, factories can’t make components quickly enough to satiate the current demand, which has skyrocketed on the back of breakthroughs in AI technologies. As a result, bidders for these components are in bidding wars. Alongside acknowledging all of this, Sony has confirmed to investors that it will not sell any hardware at a substantial loss. It hasn’t ruled out selling at a loss, but it will not be substantial. It did not elaborate on what its definition of substantial is, but there’s not much wiggle room here.
Selling at a Loss
The problem with selling hardware at a loss is that it can’t be done to scale. Hardware has been sold at a loss in the past, but the margins are minimal. We are talking dollars, not hundreds of dollars. Further, and this is very important, it is with the expectation that this will only be for a limited time, not perpetually. And this is because you can lose a ton of money very quickly with this approach.
Say the PS6 is sold at a $100 loss. Well, if you sold 20 million units of the PS6 at a $100 loss, which even at $1000 the PS6 should easily do, that’s a $2 billion loss. Sure, you make money on the back end with software and subscription services, but this eats into your revenue massively. Now, imagine you sell 100 million units at this loss, considering both the PS4 and PS5 have cleared this number. Well, that’s a $1 trillion loss.
The massive problem Sony faces is that the situation is just getting worse. Prices on these components are going to increase through the end of the year and next year, with some forecasts estimating a stabilization in 2028. This may be wishful thinking, though, and it’s just a stabilization. There is no forecast estimating a return to normal, suggesting $1000 hardware won’t just be the new normal, but the best-case scenario.
All of that said, and as always, feel free to leave a comment or two letting us know what you think, or join the video game conversations happening over on the ComicBook Forum.
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Courtesy of Wizards of the Coast
