Bloomberg: PlayStation 5's Bill of Materials have been pushed up to $450 due to scarce NAND and DRAM components

maabus1999

Member
Oct 26, 2017
519
I don't think many of you realize that if the bill of materials is $450 and they sell the console at $499 they will be taking a loss between $50 to $100 a box due to other costs.
 

Kcannon

Member
Oct 30, 2017
3,041
Another thing that makes $399 unlikely is seemingly the scarcity of those components Sony is trying to get.

Selling at a loss with potential for shortages would be awful. It also makes a online revenue strategy not viable as well.
 
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bsigg

Member
Oct 25, 2017
10,345
Watch the PS5 and Series X both be $599. A BOM for $450 doesn't include R&D, marketing and retailer cut costs, these things could easily get up there.
 

Brolyboi

Member
Nov 2, 2017
58
I don't think many of you realize that if the bill of materials is $450 and they sell the console at $499 they will be taking a loss between $50 to $100 a box due to other costs.
They are willing to take a loss, as MAU is the important metric. People thinking they will be $399 are dreaming, as like you say, the loss will be tremendous.
 
Nov 15, 2018
621
2months when considering the real presentation...this was january, the console released march. there were teasers in october though.
So i seriously don't get the issue here. "they never did this before" doesn't cut it, honestly.

600 dollars in 2003 is 841 dollars today

So when comparing the ps3 price to a new console think through that
The wording on that article is weird tbh.
With the $450 unit cost and a similar gross margin, the PlayStation 5’s retail price would have to be at least $470. That would be a hard sell to consumers, considering Sony’s most expensive machine now is the $399.99 PS4 Pro and is often discounted, according to Macquarie Capital analyst Damian Thong.
I mean yeah...breaking news, Sony might be about to release in 2020 hardware more expensive than the Pro model from the PS4 that was released 3 years ago.
 

Nolbertos

Member
Dec 9, 2017
1,313
Well, looking like Sony will have to take a loss per console to be loss leader. I remember when PS4 launched they took a loss per unit but made it back through PSN, 3rd parties, 1st party sales, etc. A break even scenario could also happen, but knowing Sony and MS warchest to withstand Xbox losses, they’ll lose the expenses game and bleed quicker. I have a feeling that Sony might have to increase PSN or release more 1st parties on PS5 launch to withstand console sales losses should they go the $450 to $499 price route. At least that’s more manageable than launching a console at $399.
 

Dreams-Visions

The Fallen
Oct 25, 2017
19,793
Miami, FL
If this launches at less than $500, don't take it as a victory. Sony will make it up by (1) increasing the subscription costs of PSN or (2) increasing the price of peripherals. Or both. Hell, they may do that anyway, but it will be cheaper for us to eat the higher price up front than have to pay for it over the next several years via fees.
 

Ojli

Member
Oct 28, 2017
792
Damn, I've been hunting for a 1 TB nVME M.2 memory since the new year and most have been increased by about $60 since then (from about $140 to $200 in Sweden). I should have bought one during Black Friday
 

Mendinso

Member
Oct 25, 2017
1,878
Something to note (and it's probably been mentioned in the thread already). Most console makers will sell the console itself at a loss (though eventually its sales will become profitable), but often make it up in other areas, both in licensing revenue from game licenses (both in licensing fees getting the games on their system and a percentage share of the games sales), as well as profits from their own titles. Plus other sectors I didn't mention. This is usually an area that would make up the difference.

Now, will Sony sell the console for a much lower or higher loss? I don't know. It's hard to tell with them, especially for modern Sony. I do feel the $500 would be the absolute upper limit, otherwise I feel we'll get another PS3 situation on our hands.
 

Fabtacular

Member
Jul 11, 2019
197
Time for MS to take that loss, sell at 399. Would be a bold move and I'd like to see how it turns out.
MS will take their loss on Lockhart, if anything.

Remember the talk of $500/400/300 XSX/PS5/XSS?

I’m not sure how realistic $300 for Lockhart ever was, but if PS5 is $499 the attractiveness of a $300 Lockhart is all the greater.

Very easy for me to see all the “next gen consoles - compared” articles all concluding that XSS is the next-gen console to buy if you can forego Sony exclusives, because on sets less than 75 inches the difference between 1080 and 4k isn’t noticeable for most people. And packaging in three months of Gamepass could be enough to convince some current PS4 owners to leave their digital PSN libraries behind and save the $200.

MS’ two-ski next-gen condole strategy is endlessly fascinating. Could be genius. Could be disaster.
 

gofreak

Member
Oct 26, 2017
3,378
Yeah, I agree with that read of it. In terms of prognosticating, I think that if it was business as usual on that front there'd be no reason to point it out to allay fears of a pricey console to stakeholders. I personally will be surprised if there's more than one or two games that are PS5 exclusives.
I think it will be pretty standard, in terms of non-cross-gen games. That is, a minority of the games of course, but more than one or two. I think it's maybe not coincidence that the first two PS5 games we know about are not also coming to PS4. Assuming they're at launch, that's two already, and they haven't even discussed first party offerings yet. Add in a couple more first party, a couple of partnered indie/second-party titles, and I expect it'll be a fairly standard launch in terms of exclusives vs cross-gen titles.
 

Splader

Member
Feb 12, 2018
2,227
Unless Sony wants to take a decently large loss, the PS5 is going to be a 499 console. That's not a bad thing and it was about what I expected.
The question I have is whether MS is considering going 599 or not...
 

Rask

Member
Oct 25, 2017
125
Gotcha. Do we know how much materials were for PS4 when it launched?
$381 according to the article. Doesn't mention all the other associated costs, though.

I'm still thinking Sony is gonna shoot for $399 even if they have to sell at a loss for a little while. They did it once with PS3 so it wouldn't be out of character for them, and they know a $399 PS4 is a huge part of what won them this generation. The rarity thing is a temporary issue, where as pricing higher than MS could incur long term headaches.
 

Fabtacular

Member
Jul 11, 2019
197
Just a quick FYI: The author of this article, Takashi Mochizuki, is known for making up shit:



And in May 2018 he also wrote this, and claimed he got this info from Sony PR (which was obviously a lie):



So better take this article with a huge grain of salt.
Could just be coincidence, but Albert Penello’s reading of the Sony CEO’s comments about pricing and limiting budgets was that the Sony BOM costs were likely trending higher than anticipated, and that they were considering their options on how to deal with that. This story fits right into that theory.
 

Fisty

Member
Oct 25, 2017
6,989
I’m not sure how realistic $300 for Lockhart ever was, but if PS5 is $499 the attractiveness of a $300 Lockhart is all the greater.
Not necessarily, when people can pick up a $150 XB1S at Gamestop and play 98% the same games it's going to be a bit harder to sell a $300 (optimistic) entry-level next-gen machine. By the time Xbox's next-gen exclusives start rolling in, the XSX will probably already be cheaper than its launch price and bundled to hell and back, depending on sales performance
 

Xbox FanFest

Member
Dec 30, 2019
166
MS will take their loss on Lockhart, if anything.

Remember the talk of $500/400/300 XSX/PS5/XSS?

I’m not sure how realistic $300 for Lockhart ever was, but if PS5 is $499 the attractiveness of a $300 Lockhart is all the greater.

Very easy for me to see all the “next gen consoles - compared” articles all concluding that XSS is the next-gen console to buy if you can forego Sony exclusives, because on sets less than 75 inches the difference between 1080 and 4k isn’t noticeable for most people. And packaging in three months of Gamepass could be enough to convince some current PS4 owners to leave their digital PSN libraries behind and save the $200.

MS’ two-ski next-gen condole strategy is endlessly fascinating. Could be genius. Could be disaster.
Very true.. and good points. Hell. Take the loss on both. Get everyone in the ecosystem and then make the money back on gamepass and live and all the rest of that type of stuff. We shall see. What an exciting console launch this is going to be!
 

fuzzyset

Member
Oct 25, 2017
1,004
I haven't been following these next gen threads but I'm shocked a lot of people expected a 400$ price point for next generation. The old machines were underpowered out of the gate and allowed that price point. There's been no indication this round of consoles will do the same.
 

Splader

Member
Feb 12, 2018
2,227
Not necessarily, when people can pick up a $150 XB1S at Gamestop and play 98% the same games it's going to be a bit harder to sell a $300 (optimistic) entry-level next-gen machine. By the time Xbox's next-gen exclusives start rolling in, the XSX will probably already be cheaper than its launch price and bundled to hell and back, depending on sales performance
You really think the XSX will be even near 300 one year after release?

And hell, even if it was, do you think Lockhart would just be chilling at 300 the entire time?
 

bsigg

Member
Oct 25, 2017
10,345
$381 according to the article. Doesn't mention all the other associated costs, though.

I'm still thinking Sony is gonna shoot for $399 even if they have to sell at a loss for a little while. They did it with PS3 and they know the PS4 price is a huge part of what won them this generation. The rarity thing is a temporary issue, where as pricing higher than MS could incur long term headaches.
$399 would mean a minimum loss of $80-100 per console, probably more after all other costs are factored in.
 

Wonderbrah

Member
Nov 7, 2017
256
So why don't they just sell it at cost for $449.99? No loss, no profit. Only a $50 increase from the PS4 which released over SIX years ago.

If Xbox X does $499.99, they win. If Xbox X does $399.99, an extra $50 for a (hopefully) more premium console isn't much to ask.
 

dgrdsv

Member
Oct 25, 2017
3,538
Msk / SPb, Russia
I thought Microsoft were supposed to be this mega rich company that could easily undercut Sony, so why would they release such an expensive console that would doom them.
It's not going to be $800. Series X will retail between $499 and $599.
Can't do direct comparison due to economies of scale ordering. Since both companies will be ordering in the millions plus efficiencies of not selling it as a standalone product, it will be considerably cheaper.
And it would be DoA if it did. Any console launching at a price more than $600 is DoA. Hell, even $600 is a significantly tough sell.
But most posters on here always say to me that retail price has nothing to do with the components of the console.
At that price it becomes a niche product like the 3DO was and NeoGeo.
I agree with all of this (well, mostly). What I'm saying is that I won't be surprised by such a high price since I can totally see why they would need to price it like this. Whether they will or even will actually need to at the end of the year remains to be seen.
 

doncabesa

Member
Jun 27, 2018
1,012
Not necessarily, when people can pick up a $150 XB1S at Gamestop and play 98% the same games it's going to be a bit harder to sell a $300 (optimistic) entry-level next-gen machine. By the time Xbox's next-gen exclusives start rolling in, the XSX will probably already be cheaper than its launch price and bundled to hell and back, depending on sales performance
xbox one s performance compared to series x performance will be such a massive gulf that most people will not want to go with the cheaper (and soon harder to find ) option. I disagree with your point in every way imaginable.
 

RKR

Member
Oct 27, 2017
1,881
NL
well I wouldn’t say X1X selling to 20% of Xbox buyers, which was the lowest selling console this gen (unless Wii U is included) at roughly 8M per year (so 1.6-2M X1X per year) doesn’t exactly scream success for that $499 price. And they did rush to get XB1 down to $399 like 6 months after launch.

and smartphone sales have slowed as prices got higher, people are upgrading every 3 years instead of 2, so yes people are okay with higher prices but it doesn’t necessarily mean they will buy at traditional rates/timelines.
I think the Pro isn't selling to a huge percentage either, probably better than X1X but its not replacing the base PS4 or anything close. But thats because far cheaper alternatives lots of consumers are content already existed. If both new systems launch at 499 there isn't an alternative, they will do fine as long as the products are good (the base X1 wasn't all that great, and their vision with it wasn't either).

Traditional rates shouldn't matter for a console, even if they do mid gen upgrades again you're looking at about 3 years at a minimum. Personally speaking i'm fine with replacing a system after 3 or 4 years (I bought my Pro in 2017). I like how after 7 years I am not really bothered by huge performance and IQ issues. Something that plagued the PS3 and 360 in the later years.
 

Pryme

Member
Aug 23, 2018
2,915
We going back to "the Xbox division has access to the ms warchest" again? While cloud is important and the Xbox has a partial part in that, they don't get a blank cheque. The investors would go nuts
‘Access to the warchest’ and ‘ blank cheque’ are two distinctly different things. At no point did I imply or insinuate a limitless budget.

The only explanation I can hazard as to why you completely misconstrued my last comment is that you may not be a native English speaker.
 

domthybomb

Avenger
Oct 25, 2017
3,939
‘Access to the warchest’ and ‘ blank cheque’ are two distinctly different things. At no point did I imply or insinuate a limitless budget.

The only explanation I can hazard as to why you completely misconstrued my last comment is that you may not be a native English speaker.
With the context to Microsoft it sure isn't.
 

Nostradamus

Member
Oct 28, 2017
1,006
So why don't they just sell it at cost for $449.99? No loss, no profit. Only a $50 increase from the PS4 which released over SIX years ago.

If Xbox X does $499.99, they win. If Xbox X does $399.99, an extra $50 for a (hopefully) more premium console isn't much to ask.
The $450 figure doesn't include additional costs such as packaging, transportation, retailer margins etc. The actual cost is significantly higher.

Also people that are asking Sony to eat gigantic costs are delusional. Why would Sony choose to sell sth at a huge loss over selling less consoles? Why is player base more important than actual profitability? There are only so many losses you can cover from subs and peripherals.
 

Fisty

Member
Oct 25, 2017
6,989
You really think the XSX will be even near 300 one year after release?

And hell, even if it was, do you think Lockhart would just be chilling at 300 the entire time?
The XSX will drop in price much faster than the Lockhart would, especially if it launches at 300. They cant cut component costs very much at that price, especially as quickly as they could for XSX.

xbox one s performance compared to series x performance will be such a massive gulf that most people will not want to go with the cheaper (and soon harder to find ) option. I disagree with your point in every way imaginable.
Yeah i dont buy that, the XB1S and PS4 Slim still outsell the 1X/Pro models by quite a margin, and if cross-gen drags on and XGS isnt making next-gen exclusives right off the bat, then the Lockhart is even less attractive to budget gamers because it's basically an XB1X with faster loading and lower resolution.
 

Red Comet

Member
Jan 6, 2018
67
I don’t really have too many qualms with paying $500-600 for a PS5, considering the quality of the components. For a device that is going to last me 6+ years, that doesn’t seem to outrageous a price to pay. Especially considering the fact that a lot of us, myself included, pay $1000+ for cell phones that we’re lucky if they last us 2 years. I also don’t plan on investing in Microsoft’s offerings this gen, at least at launch, so the higher price for one console is not as tough a pill to swallow.
 

Nintendo

Member
Oct 27, 2017
9,960
$499 sounds good to me. Hell, even $599 if it's powerful enough. I don't want them to compromise on anything. This is a console I'll use for 5+ years. I don't mind paying extra to make it last longer.
 

Apathy

Member
Oct 25, 2017
5,384
‘Access to the warchest’ and ‘ blank cheque’ are two distinctly different things. At no point did I imply or insinuate a limitless budget.

The only explanation I can hazard as to why you completely misconstrued my last comment is that you may not be a native English speaker.
You shouldn't try to talk down to me, I didn't misconstrue anything. You said that you suspect that Microsoft would "fund it as much as they need to" implying going above any standard budget it may be given at the start of the fiscal year. You might not know this, but no matter how important a product is to a company, it still has a set budget at the start of the year.
 

Kcannon

Member
Oct 30, 2017
3,041
$381 according to the article. Doesn't mention all the other associated costs, though.

I'm still thinking Sony is gonna shoot for $399 even if they have to sell at a loss for a little while. They did it once with PS3 so it wouldn't be out of character for them, and they know a $399 PS4 is a huge part of what won them this generation. The rarity thing is a temporary issue, where as pricing higher than MS could incur long term headaches.
I certainly don't see them repeating the PS3 strategy, especially when PS4 was all about avoiding that. They still sold at a loss, but not a big one.

$499 could very well signify a loss too. No way Sony would lose further $100 as that would mean more years without potential profit. Would take a long while for parts to become cheap enough to offset that difference.
 
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Spyder_Monkey

Member
Oct 25, 2017
10,460
Between coronavirus, trade wars, the decision to use really expensive components, and the scarcity of said components.

PS5 and XSX are coming out at a really bad time.