When it comes to a new generation of consoles, or any popular consumer hardware for that matter, the price is something everyone is interested in. Too low means it will likely sell very well but at a loss per unit, while too high could generate a profit per unit but lower sales. In business pricing a product is hard and requires a lot of research. The price is determined not just by how much consumers are willing to pay but by various associated costs, including manufacturing.
According to Bloomberg, Sony is hitting a wall when it comes to the manufacturing cost of the PS5 with insiders claiming the price is $450 per unit. This would be down to the components and parts Sony would be using to create a console that can offer high performance, and may even be the result of some discount between the suppliers and Sony. Of course, we don’t know that and the manufacturing cost is only part of the issue.
There is a whole supply chain that Sony has to put the PS5 through and each section would have its own associated cost. The research and prototype stage would have taken a large chunk, sourcing the materials some more, then the manufacturing stage. That is not the end of the supply chain though. Following manufacturing Sony has to factor in the costs of storage for the units it has created, the shipping costs to get the PS5s from the factory floor to retail stores globally, the creation of packaging for each unit and the design costs there, plus potential tariffs on goods, and taxes. The $450 manufacturing cost is just one part of the puzzle and the total production cost per unit will be higher with everything factored in, and that is after you consider economies of scale where costs would be lower due to bulk production instead of limited.
Where does that leave the final price of the PS5 then? Only Sony’s senior executives and strategic teams will have any inkling there. Is Sony willing to sell at a loss per unit to then make up profit elsewhere such as on games and accessories, or will the company seek to make a profit per unit? It is likely Microsoft is facing a similar dilemma with the costs involved. We are getting closer to the proposed winter 2020 release date for these consoles, so prices will have to be confirmed soon by both companies.