Cost is key when it comes to selling a product to consumers, and pricing the PS5 and Xbox Series X will be a careful balancing act.
In Sony’s Q3 earnings report, the company recently implied that it was waiting to see what the price of the Xbox Series X was going to be before deciding on the price of the PS5. I know that saying a console needs to be priced competitively is a bit like saying water is wet. Everyone knows price is a huge factor when it comes to any sort of purchase. Sony implying as much isn’t out of the ordinary, but it is an interesting marketing tactic if that’s what it’s going for.
Sony CFO Hiroki Totoki explained that competition in the console industry is something the company needs to consider before discussing the price of the PlayStation 5.
What is not very clear or visible is because we are competing in the space, so it’s very difficult to discuss anything about the price at this point of time, and depending upon the price level, we may have to determine the promotion that we are going to deploy and how much costs we are prepared to pay
So it’s a question of balance, and because it’s a balancing act it’s very difficult to say anything concrete at this point of time, but when I said smooth transition, we mean that we will definitely choose the optimal approach and that we will try to have the best balance so that we will be profitable in the life, during the life of this product.
His comments were translated by VGC, so the exact wording may be a little off, but it’s difficult to mistake the implications. When it comes to consoles, the Xbox Series X is the PS5’s main competition. As much as I love the Nintendo Switch, I don’t think that Sony sees it as much of a threat — though that could be changing as more AAA blockbusters are released on it.
I have no insight as to how the price of the PlayStation 4 was actually determined, but from the outside looking in, a lot of people noticed how Sony was quick to flaunt the PS4 for being $100 less than the Xbox One at launch. The PS4’s price was also never publicly announced until after we had found out the Xbox One was going to cost $500.
The Xbox One seemed expensive in that regard, making the PS4 a much more appealing purchase, but in reality, the Xbox One wasn’t being sold at a huge gain for Microsoft. Xbox Chief Marketing Officer Yusuf Mehdi said that at the time that Microsoft was “looking to break even or low margin at worst.” The PS4 was only $400 and Sony reportedly took a loss of about $60 on each console sold, hoping that software and services like PlayStation Plus would bridge the gap.
Sony doesn’t want to price the PS5 too high.
Sony certainly doesn’t want to make the same mistake again at pricing the PS5 abnormally high. When the PS3 launched in 2006 (a year after the Xbox 360 hit the market), it came to store shelves at a whopping $600. Sony would eventually take a $3.5 billion loss on the PS3 in 2007 and 2008.
Xbox head Phil Spencer has already stated in an interview with The Verge that the Xbox Series X, known at the time as Project Scarlett, “will not be out of position on power or price.” You shouldn’t expect it to be incredibly cheap as it is a premium console, but Microsoft also knows it can’t price it too high in fear of alienating its consumers. Plus, Microsoft is in a better position now to take a hit if it sells it at a loss. If Sony’s comments are any indication, we can expect the PS5 to be priced even lower or at the same level as the Xbox Series X.
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