The price increase of the SONY PS5 has taken us all by surprise, especially those of us who usually follow the evolution of prices in the world of hardware on a daily basis. Typically, the cost of a console’s components gets cheaper over time through a series of revisions and new versions of the system. However, with the current PlayStation 5 something has happened that no one expected and that is unprecedented in the history of video game consoles.
One of the most repeated lies in the propaganda of console brands is that the hardware is sold at a loss. This is false from the moment that if this were so, then the manufacturer would have to pay money on the entire distribution and production chain, taxes included. Rather the answer is, consoles are sold at zero or minimal profit to the manufacturer in order to recoup money from the sale of games, peripherals, and system-related services. In the midst of all this, the myth has emerged that the rise in price of PS5 is due to increased costs.
What nobody tells about the PS5 price increase
The big mistake that is usually made is the fact of relating the price of a product to its production cost, in such a way that many fall into the trap of thinking that if a product reduces its costs it will become cheaper. Plenty of times we’ve seen re-releases that are cost cutting for the manufacturer in the form of a redesign without an associated price drop. Of course, this is not the case with SONY with PS5 and here we have to throw a bucket of cold water that many of our readers may not like and with this we do not intend to exonerate SONY from its terrible decision due to the PS5 price increase .
Since the launch of the console we have seen how many have taken advantage of the lack of stock to sell the console well above the recommended price. Many PS5 users have not paid €500 for the console, but much more. Which means sending a signal to SONY that it can increase the price of its console, since there are people willing to pay more than its price to enjoy it.
The only way this looks like a bug? Not only will fewer consoles be sold, but SONY’s profits will drop enough for them to consider lowering the price. And we will see if over time and despite criticism on the internet, if PS5 with its enormous popularity is affected by it.
PC hardware is a red ocean
On PC we have an ecosystem where we have several options that compete with each other to attract the attention of consumers. Many of them have an almost equal perception of value and what makes us interested in one or another product if they are the same depending on the price they have. That is why graphics cards are falling in price, due to the fact that in a fight of this type it should not be seen as a waste of money, but as an opportunity to outperform your rivals or rather to sell your products.
In addition, we must bear in mind that the commercial life of a PC product is much shorter than that of a console. In the sense that a product with better specifications is just around the corner and the important thing for manufacturers is not only to sell, but to clear their stock as quickly as possible. Once a technically superior product exists at the same price, it becomes difficult to sell at the original price and may even be rejected by much of your potential audience as they get less for more.
So, with the next generation of graphics cards from NVIDIA and AMD already in factory production and SSDs with PCIe Gen 5 support just around the corner, it’s only natural for manufacturers to lower prices. At the end of the day, it is the only thing they can do if they do not want to keep the inventory collecting dust in their warehouses.
In changed PS5 is an ocean, blue?
Many of you may be wondering what this oceans and colors mean, since it comes from a book on business strategy called “The Blue Ocean Strategy” where a concept called value innovation is explained. This is that if you can make your product stand out enough from the competition to the point where it looks like a different product, then you eliminate the competition and with it the price war.
From SONY’s perspective, it’s not that Xbox doesn’t exist, but that they understand that people are looking for a unique product called PS5, with specific specifications and that the competition doesn’t offer. That is, no one else can make PS5 and, therefore, its manufacturer understands that they are out of a direct price war.
In contrast, PC component manufacturers cannot afford to maintain prices independently of the competition because they do not offer a differentiated product. Of course, this is a consumer perception. From PlayStation they are testing the market. What they want to do is see if potential new console customers are willing to pay for it. So they have to be very confident to play with fire like this.