Sony Finally Turns a Profit on $499 PS5
Just after hitting 10 million PS5 sales, Sony has announced that its pricier version of the console is no longer selling at a loss. Its $399 Digital Edition, however, still has a while to go.
In a financial pulse check with Bloomberg, Sony Chief Financial Officer Hiroki Totoki shared that the company’s most popular product had started to turn a profit. The $499 version of the PS5, which accepts hard-copy games through its 4K Blu-ray drive, previously cost more to make than it earned on the market, even with its bigger price tag. Bloomberg estimated in February of this year that the unit costs $450 to make in parts alone, without accounting for labor and retail delivery costs. This is likely due to Sony having to compete with the smartphone industry for already-scarce parts, including those for DRAM and NAND flash memory. Both the $499 PS5 and the $399 Digital Edition (which does not include a disc reader) also contain an “unusually expensive” cooling system to ensure that their chips don’t overheat.
But as Sony’s stock price gradually climbs, the company also gets to celebrate that its more expensive PS5 is no longer a financial burden. Rather than having to offset losses via other hardware sales (like the company will need to continue to do with the Digital Edition), Sony can sell the PS5 at a profit while it keeps serving as a gateway for sweet, sweet software sales. It’s truly a banner month for Sony, who also reported their biggest-ever Q1 PlayStation revenue this week.
Selling gaming consoles at a loss isn’t a new tactic. This spring Microsoft confirmed it’s always sold Xbox consoles at a loss, and that it can afford to do so because the Xbox sets up an “end to end customer experience” that earns the company more money long-term. Think about it: if you spend half a grand on a gaming console, you’re going to make it worthwhile by also buying a ton of games to play on said console. Sony and Microsoft only need to provide a path to future profits via individual software sales and subscriptions.
Consumers have had a tough time acquiring either version of the PS5 since its release due to an international chip shortage. Many are hoping that when the chip shortage eventually ends, consoles (and other forms of hardware) will be easier to snag—but others say not to hold your breath.