Wednesday, February 3rd 2021

Sony Confirms It's Selling PS5 Consoles Below Manufacturing Cost, Ships 4.5 Million Units

Sony has confirmed that it is paying some of the upfront cost in acquiring their latest PS5 games console by pricing it below manufacturing cost. Consoles being priced as such isn't a new move in itself; manufacturers have often sold their consoles at a loss so as to keep consoles attractive to buyers and thus increase their install base. This, in turn, equates with higher sales of software - which is often where Sony or Microsoft recoup their margin loss on hardware.

Sony has also confirmed that its PS5 console has sold around 4.5 million units since launch, putting it in a similar footing with the PS4 in the corresponding period, despite the higher retail price at launch. The sales figure also puts Sony's PlayStation division results for 2020's Q3 FY as their historical best ever since the company started selling games consoles. Revenue increased 40 percent to 883.2 billion yen ($8.4 billion), partly driven by PS5 sales, whilst operating profit increased by 50 percent to 80.2 billion yen ($763.3 million) due to higher software and services sales (such as PlayStation Plus subscriptions), and better margins on PS4 hardware, which still shipped around 1.4 million units.
Source: Sony
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22 Comments on Sony Confirms It's Selling PS5 Consoles Below Manufacturing Cost, Ships 4.5 Million Units

#2
raptori
INB4 "Sorry we have to rise the prices just like every other tech company these days" ...
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#5
neatfeatguy
I haven't followed consoles for a while, but I always thought this was kind of the norm. Sell the consoles at cost or even at a loss while recouping revenue in other aspects such as subscriptions, licensing fees, digital sales and so on.
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#6
Chomiq
raptoriINB4 "Sorry we have to rise the prices just like every other tech company these days" ...
Don't worry about that. Now that they all digital version of their console they don't have to worry about pricing. They've got the PS Plus, they've got the only digital distribution service - they're set.

MS is probably doing the same with Series S and X.
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#7
FreedomEclipse
~Technological Technocrat~
gottimwUmmm... thats sounds like it would fall under anti-dumping law in EU.

ec.europa.eu/trade/policy/accessing-markets/trade-defence/actions-against-imports-into-the-eu/anti-dumping/
You say this but in short, thats also how the market for printers work. HP, Samsung, Epson, Brother etc etc all sell their printers at a loss because they make up their profits by the selling of ink/toner cartridges & other accessories/consumables.
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#8
HD64G
It was a sure thing that in this price PS5 was sold below cost. It should have a price of at least $600-650 to get them some money for the HW. But they gain much more in the long term if the PS5 owners base gets games, accessories and subscriptions, so it is a smart business move played again in the past successfully.
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#9
QUANTUMPHYSICS
I managed to get my PS5, and PS5 for my cousins.

But considering how many children woke up disappointed for Christmas, the "demand" is considerably lower now.
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#10
kayjay010101
In other news, water is wet and the sky is blue.

Consoles are almost exclusively sold at a loss and the cost is recouped in games licensing, subscriptions and ads.
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#11
ZoneDymo
kayjay010101In other news, water is wet and the sky is blue.

Consoles are almost exclusively sold at a loss and the cost is recouped in games licensing, subscriptions and ads.
^this, Nintendo was the only company for a long time selling the console itself at a profit.
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#12
Vya Domus
kayjay010101Consoles are almost exclusively sold at a loss and the cost is recouped in games licensing, subscriptions and ads.
Even if they are sold at a loss at their launch that doesn't last for long.
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#13
dicktracy
That's 4.5 million chips that could've gone to desktop CPUs and GPUs. AMD fanboys are not their main target audience anymore.
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#14
Tartaros
dicktracyThat's 4.5 million chips that could've gone to desktop CPUs and GPUs. AMD fanboys are not their main target audience anymore.
What
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#16
duynguyenle
gottimwUmmm... thats sounds like it would fall under anti-dumping law in EU.

ec.europa.eu/trade/policy/accessing-markets/trade-defence/actions-against-imports-into-the-eu/anti-dumping/
Did... Did you even read the policy in your own link???

I will quote verbatim the very first paragraph in the website you linked (bold emphasis mine)

A non-EU company is 'dumping' if it exports a product to the EU at a price lower than the normal value of the product. The normal value is either product's price as sold on the home market of the non-EU company, or a price based on the cost of production and profit.

Sony is NOT 'dumping' this product. The retail price is more or less set at more or less the same amount across all the different markets that Sony sells these in (with some allowance for VAT, currency fluctuations etc... If they were really 'dumping' the product, they would set the RRP on their home market (say, Japanese domestic pricing) to say, 800EUR equivalent, and selling the console at 500EUR in the EU.
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#17
Caring1
QUANTUMPHYSICSBut considering how many children woke up disappointed for Christmas, the "demand" is considerably lower now.
You mean over indulged brats woke up to a dose of reality, they can't always get what they want!
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#19
Xaled
if only Sony was really manufacturing, Acutally the real losing side here is AMD !! (yeah they are definitely losing because they could've won too much more if they'd used their resources for PC or even mobile GPU&CPUs)
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#21
watzupken
gottimwUmmm... thats sounds like it would fall under anti-dumping law in EU.

ec.europa.eu/trade/policy/accessing-markets/trade-defence/actions-against-imports-into-the-eu/anti-dumping/
You sounded like you prefer to pay more for the consoles. I am sure Sony or Microsoft won't mind. :laugh:
Xaledif only Sony was really manufacturing, Acutally the real losing side here is AMD !! (yeah they are definitely losing because they could've won too much more if they'd used their resources for PC or even mobile GPU&CPUs)
Why so? Sony and MS are paying AMD the asking price while they themselves are sucking up the losses per unit sold. They may not make as much as selling their own CPU for example, but I am sure with such a high sales volume, they can still profit handsomely from it. Consider the fact that 4.5 million units of PS5 sold as reported here, and an estimated of 3.3 million XBSX sold for 2020. In other words, they have sold almost 8 million SOCs unchallenged since they pretty much cornered the high end console market.
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