The PS 5 will “contribute negatively to the revenue” of Sony in the coming months. This was confirmed these days by Hiroki Totoki, CFO of the company, who thus recognized – although he did not express it in those words – that Sony will lose money with each PS 5 that it sells.
This data does not surprise almost anyone, because for a long time in the video game console industry it is normal to see how the consoles themselves are sold at a loss for the manufacturer, as we have seen in our quick review of this history. That, attention, does not matter much, because then they recover those losses more than thanks to the sale of video games.
Sony PS 5: The losses end up compensating (a lot)
Let’s go back in time. Let’s place ourselves in 2013, the year in which both the Xbox One and the PS4 were released. Microsoft and Sony achieved something unheard of here: they made money with every console sold. With each PS4 Sony made 18 dollars, and with each Xbox One Microsoft made 28 dollars. It’s not much, of course, but at least they didn’t lose it.
In fact that was the unwritten norm in the console world for the previous two generations. Sony and Microsoft lost a lot of money with their PS2, PS3, Xbox and Xbox 360, as revealed by studies that compare the sale prices with the cost of the components and manufacture of those models.
Sony, for example, lost money on every PS3 it sold at its launch in 2006. A lot, in fact: about $240 per console, a figure that certainly seemed worrisome even when compared to what its rival was raising.
The Xbox 360 wasn’t a good deal as a hardware product for Microsoft either. When it put it on sale in 2005, it lost about $125 for each one it managed to place in the hands of users.
The PS3 had a high asking price : adjusted for inflation, it would equal $659 in 2020. The Xbox 360 was clearly cheaper at $408, but it included neither that unique Cell processor nor that Blu-ray drive that made it a multimedia player all-rounder.
Although that console retailed for $599 – a price many complained about – iSuppli reports at the time estimated that it cost $ 840.34 to manufacture. With the cheap version of the PS3 with 20 GB of disk (instead of the 60 GB of the superior version) the thing was even worse: it was sold at 499 dollars but Sony lost 306 dollars with each one of them because the hardware, for the rest was identical.
The Microsoft console managed to reach ‘break even’ a year after its release, but it would take Sony almost four years to not lose money with each PS3 it sold. He did it in June 2010.
The same thing had happened before with the PS2 that Sony launched in 2000. As El Mundo indicated then, “the manufacturing price –95,000 pesetas– is much higher than the sale price: in Spain 74,900 pesetas “.
The article discovered already then what was the business that both Sony and Microsoft were really pursuing: ” the losses are wiped out by the royalties that developers must pay for each of the titles they sell for this machine. A good part of the price of each game it goes to Sony. ” What they lost with the hardware they ended up recovering (in spades) with the sale of video games.
Something similar happened with the original Xbox launched in 2001: studies at the time reveal that making this console cost Microsoft $425, but they sold it for $299. They lost $126 each time one of them was sold.
In all cases, of course, these losses were reduced over time : components and manufacturing processes became cheaper, which made it possible to assume these losses and amortize them thanks to the games and the long life cycles of the consoles, which oscillate traditionally between 6 and 8 years old.
Although Microsoft has not pointed it out in official comments as it has happened in the case of Sony, the new Xbox Series X and Xbox Series S will also be sold at a loss for Microsoft. In fact, the impact will be even greater for the most affordable console, the S Series , which, even though it is more modest, does not pay off for the Redmond firm.
Therefore, everything points to both the Sony PS 5 and the Xbox Series S / X being sold at a loss during the first months, but today more than ever that does not seem like a big problem: the sales of video games are joined by the new subscription services that favorably compensate allow these new bets . Neither Microsoft nor Sony should therefore be overly concerned.