PlayStation 5

Rumor that Lockhart will be unveiled in August.

Microsoft will have a big hill to climb compared to Sony, as you note.

Perhaps they’re counting on being able to price the Series S significantly lower than what Sony could get away with. For example, what if it’s:

PS5 - $599
PS5 digital - $499
Xbox Series X - $599
Xbox Series S - $299 (or $399)

I think it’d have to be that significant for them to have a clear value proposition for players looking for a lower-cost option.

That’s basically impossible. The estimates are that they’ll save about $20 on the bill of materials. Anything beyond that would have to come from Sony subsidizing the digital edition more than the normal, based on them making more money from digital sales than physical ones. That’s about $8 per game. The average console user buys about 2 games per year. There is no way they can recoup an extra $180 of subsidies from that. They probably can’t even recoup an extra $80.

I think Sony is slowly priming people for a higher price, e.g. “value creation” and so on and so forth. Given that the Blu-ray drive is not a huuuuuge cost factor, I find it unlikely that there’ll be a $399 sku.

Isn’t there licensing to be paid for the physical drive as well?

Judging by how MS handled the X, I don’t think so. They made you download the Blu-Ray app to reduce licensing fees, so (other than chips etc which are built into the hardware cost) the licensing is based on active users rather than the actual hardware. Of course, Sony may not have the same licensing setup.

This is my guess if neither company blinks.

If the flagships are $499, there will be rejoicing and red ink.

Yes, if you include a drive, you have the physical cost of the drive itself, licensing for blu-ray, you make more money per game selling digitally, and of course you enable the used games market to exist so you get less sales overall as each game can be played by multiple people.

If the PS5 digital is $100 cheaper than the XBX, Sony’s going to obliterate MS.

The Blu-ray licensing fee is ~$10. That still puts the difference between the two at most $30 total. The price isn’t going to be anything more than maybe $50 at most then cause Sony isn’t going to eat a bunch of money per system ever again. So as stated above already its why they are pushing the “value” word around. These are going to be expensive machines. The hardware dictates that.

I just want them to let me pre-order the damn thing already.

timestamp 4:18 if it doesn’t go there automatically.

We’ll see, but the cost of the blu-ray drive isn’t the only calculation. Let’s pretend Sony has tons of data about how many games the average PlayStation owner buys over the lifetime of a console generation (which they do have, of course). Let’s pretend that number is…11. I have no idea if that’s the number, but let’s pretend it is.

Typically Sony gets about $7 in licensing fees for every game sold. But for Digital Edition sales, they will probably get the normal digital cut these days of 30%, which will generally be $18 ($60x30%). That means Sony makes $11 more per game for every Digital Edition buyer, and that means over the lifetime of the console they will make $121 more on average.

That means they can charge $100 less than the normal edition and still come out on top.

Possibly over the course of the entire lifetime. Which is absolutely awful economics. “Hey we might make our money back 6-7 years from now”…Sony can’t do that.

I think you’re wrong, but none of us know anything. The Digital Edition has no reason to exist if it’s only $50 less than the standard version. Just from a marketing point of view, it needs to be $100 less to make sense.

Sure they can, if they believe they’ll sell a ton more consoles doing it. That’s how subsidies have always worked.

It’s not even a subsidy! They are saying (under my scenario) that for every Digital Edition they will make at least $50 more per user than they would for the Standard Edition. And that’s not even counting what you would assume would be larger-than-average profits from the purchase of other digital entertainment, like movies/TV shows/etc. When you watch a blu-ray movie on a PS5 Sony gets $0. But if you buy it or rent it from Sony on the Digital Edition, they get their cut.

It’s pretty much a prisoner’s dilemma situation in business. Both companies probably want to sell their products north of $600… and if they both do, they both win. But if one of them cheats and sells below $600, they destroy their competitor.

For the me , the average Playstation user who primarly uses a PC for gaming .

I ended up with :
PS3 : 18 games
PS4 : 15 games, still want to get Last of Us 2 and that Ghosts of Tsushima , probably my last 2 games for the PS4.

All physical media.

That’s exactly right, and Sony has a real opportunity to hit MS here.

Digital Foundry says $8, and they’re as well informed about this as anyone saying anything publicly will be.

If I had to guess, I’d assume that this has to do with discounts. A large proportion of AAA games are not bought at full price.

I see where your 11 games estimate is derived from, but it’s worth remembering that this includes games that are digital-only, i.e. they get the same money from both console editions.

The only way I could see a deeper subsidy happening is to kill the second hand market / lending games to friends, without getting the xbone backlash. I think in the end I bought 5 or 6 games on the PS4, and played another 4 on disks borrowed from friends.

I’m not sure why anyone would suppose that an entry level product needs the same profit margin – long term or short term – as a premium product. That’s almost never the case.

In this situation, just because the cost of making the PS5 fat is less that $50 more than the PS5 thin, I think there’s very little chance that the consumer will only see a $50 price difference.

Finally, I suspect that the adopters in the first 6 months will prefer the premium versions of both consoles. The production will likely reflect that. It reminds me of a board game kickstarter where the campaign is designed around most buyers opting for a deluxe option. If more than 20% of your customers are opting for the entry level of a kickstarter game, you probably effed up the pricing tiers.

So even if the PS5 thin costs more to make than it sells for, it may not be a big deal for Sony.

Because here the problem being solved is that these consoles are expected to be very expensive to manufacture. So expensive that it’s going to raise the spectre of various failed high priced consoles from the past.

Sony and MS are probably aiming to sell them at cost, or maybe lose on the order of $50 at most. So if the price differential between the editions is much larger than the difference in BOM, it won’t be “sell low-end product for small margin” and “sell luxury product for huge margin”. It would be “sell low-end product for massive loss” and “sell luxury product at cost”. And then the questions

The premium product thinking already exists in the console space. It’s limited edition consoles. They usually look cool, and are targeted at fans of a specific game, or maybe the console maker’s history. The non-digital PS5 looks actively ugly compared to the digital edition. People will reluctantly buy it for utility, if they think they need the disk drive.