PS5 price increase: 3 inside reasons it was inevitable
PS5 price increase: 3 inside reasons it was inevitable
And why it may come to the US in one shape or another
➡️ The Shortcut Skinny: PS5 price increase
💰 PS5 price increase will happen in 7 regions – but not the US
📈 Up as much 21% due to ‘economic environment and high inflation rates’
📦 Retail execs have told me how much shipping costs have increased
📉 Meanwhile Sony and retailers deal with razor-thin margins on consoles
💸 Get ready for technology shrinkflation in the US to make up for it
Adam covered the PS5 price increase news before I woke up, and I had the same reaction many people probably did – “😮 Oh no!”
Thankfully, American shoppers have been spared the PS5 price hike, but seven regions – including the UK, Europe, Japan, and nearby Canada – will see, at worst, a 21% PS5 price increase, according to Adam’s report. The US PlayStation 5 price will stay the same – $499 for PS5 Disc and $399 for PS5 Digital. 😅
For now… 😬
Sony’s announcement seems all the more egregious now that Microsoft has confirmed it won’t increase the Xbox Series X|S price, meaning Microsoft’s flagship console has a price advantage in almost every market apart from the US.
Nevertheless, I’ve long thought Sony underpriced PS5 given the demand, and I’ve defended most retailer bundles (the ones at face value, not the QVC, HSN scams) as it thwarted resellers from trying to pounce on the console at MSRP and resell the PS5 at double the price on eBay. Bundles allowed real gamers to buy a PS5.
Here’s why a PS5 price increase was inevitable and why we may still see a higher price in the US – in one form or another.
📦 1. PS5 shipping costs
This was the No. 1 concern of US retail execs I talked to during the course of my PS5 restock tracking. In the midst of the pandemic, everything went wrong in their supply chain. Shipping PS5 consoles to the US cost more, ports in Los Angeles and Miami were backed up, US customs was taking forever to release each payload, and then driving them to their distribution centers cost even more time and money than usual.
Yet the PS5 was still priced at $499 even as these costs mounted. It didn’t add up.
🪒 2. PS5 sold at razor-thin margins
Frustrated consumers may not know this: all console makers (Sony, Microsoft and Nintendo) have sold consoles at a loss – or close to it – at launch (Nintendo Wii was one of the rare consoles that made a profit at the outset). I know that’s a big shock, but the idea has always been that consoles are the exclusive vehicle for you to buy $60 and $70 games, which is where manufacturers make out handily.
The idea has always been that consoles are the exclusive vehicle for you to buy $60 and $70 games.
The PS5 fits into this loss category now. Nine months before the PlayStation 5 launched, the PS5 price per unit was pegged at $450, according to Bloomberg. Then GPUs, memory and just about every other PS5 component surged in cost.
Exactly one year after that Bloomberg $450 estimate, Sony admitted that its console was selling for less than it cost to make.
💳 3. Membership tricks for PS5 won’t last
As PlayStation 5 demand wanes and supply increases, retailers’ novel tricks, like PS5 restock bundles and required memberships won’t be as easy to pull off.
When these maneuvers go away, so does a lucrative profit driver for US retailers. Someone is going to pay for costlier consoles.
Each Walmart PS5 restock has been behind its $12.95/mo Walmart Plus subscription over the last 10 months, many Amazon PS5 restock opportunities flirted with requiring Amazon Prime, and about one-third of the Best Buy PS5 restock dates required its egregious $199 Totaltech membership that no one wanted.
The Target PS5 restock was just about the only one that didn’t force customers into a paid membership, and, right now, consumers are demanding an end to bundles and paywalled membership. When these maneuvers go away, so does a very lucrative profit driver for US retailers. Someone is going to pay for costlier consoles.
🇺🇸 How a PS5 price increase in the US is likely
Sony is going to find a way to increase the PS5 price in the US. In fact, it’s already done so in some ways. I’ve noted that 14x more PS5 Disc than Digital consoles are being manufactured, according to my data in our PS5 Disc vs Digital comparison. That’s because Sony makes $100 more off of the Disc version, and, no, a simple 4K UHD Blu-ray disc drive doesn’t cost Sony $100 to make.
I’ve noted that 14x more PS5 Disc than Digital consoles are being manufactured, according to my data. That’s because Sony makes $100 more off of the Disc version.
This isn’t technically a PS5 price increase in the US, but you can expect Sony to work around the edges just like this to save money at your expense. When an inevitable PS5 Slim or PS5 Pro launches, I predict that Sony will adjust the pricing of new PS5 consoles to make up for these months of losses in the US. How?…
📉 ‘Technology shrinkflation’ is real
I’ve mentioned this during a media panel at an event recently, and I’m coining it.
You’re going to be paying for less so the price increase happens in ways where you can’t even tell from a stated dollar amount. For example, my favorite go-to example is that we may get a smaller internal PS5 Slim or PS5 Pro SSD than originally planned. Right now, the best PS5 SSD for most people is the 2TB capacity – the sweet spot in size and price in 2022. But if a PS5 Pro were to launch in 2023 or 2023, it deserves the up-and-coming 4TB PS5 SSD size or larger – but Sony could dial it back. Or maybe the processor won’t get the Pro-level bump originally planned.
It’s technology shrinkflation, and upon the iPhone 14 release date, I suspect we’ll see that from Apple’s storage sizes, too. Will Apple keep the same capacities and scrap a planned bump in storage sizes just to keep costs low? The funny thing is that we may never know.
One thing is certain: the PS5 price increase is real in seven countries, and Sony will do everything possible to ensure it reaps a profit from its popular gaming console. It’s already stealthy locked out “stacking” from the PlayStation Plus discount code process (so that you can’t add a second or third year at any time with a cheaper digital code; with auto-renew on by default, you’ll likely get hit with the full $60/yr).
That’s why we’re keeping a watch on the PSVR 2 pre-order dates and PS5 DualSense Edge price when they get announced. It will probably cost you more than you want, judging from this snap poll I did on Twitter.
Updated: August 26, 2022