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Sony's £449 PlayStation 5 (Disk) hardware is now profitable - Is Xbox Series X?

Sony's PlayStation 5 hardware can now turn a profit, but does Xbox Series X?

Sony's £449 PlayStation 5 (Disk) hardware is now profitable - Is Xbox Series X?

Sony's £449 PlayStation 5 (Disk) hardware is now profitable - Is Xbox Series X?

Last week, Sony announced that they had sold over 10 million PlayStation 5 consoles, cementing its position as the best selling next-generation gaming system.   

Alongside this announcement, Sony also confirmed that their £449/$499 PlayStation 5 (with Disk Drive) console is no longer selling at a loss, making PS5 unit sales profitable less than a year after the system's launch. That said, Sony's cheaper £349/$399 PlayStation 5 (Diskless) console is still being sold at a loss. 

Why is/was Sony selling consoles at a loss? 

The simple answer to this question is that Sony doesn't need to profit from its console sales. The majority of Sony's profits come from game sales and subscriptions to the PlayStation Network. PlayStation consoles are merely a means to generate more game sales and acquire more PlayStation Plus subscribers. 

To maximise game sales, Sony needs to sell as many PlayStation consoles as possible. The more PlayStation consoles that are available, the more potential customers they have for game sales. With this in mind, it is easy to see why Sony sells their PlayStation 5 consoles with minimal profit. Nobody buys consoles without investing in games for the system, which is why Sony can bank on the fact that they will generate ample profit from game sales and not hardware sales. 

So why sell PlayStation 5 at a loss? The simple answer is that Sony needs to build up a large playerbase to encourage developers to make games for the system. The more consoles that are available, the more potential game sales that they can achieve. This is especially true for exclusive titles like Demon Souls' remaster and Ratchet and Clank: Rift Apart, which are only available on Sony's latest hardware. 

Why is the Diskless PS5 getting sold at a loss? 

What should be known about Sony's cheaper diskless PlayStation 5 is that the system isn't much cheaper to produce than Sony's premium PS5 console. For starters, the disk drive within the PlayStation 5 is estimated to cost less than $50, which is less than Sony's discount for their diskless PlayStation 5 system. 

With the Diskless PlayStation 5 costing £100/$100 less than Sony's premium PlayStation 5 model, it is easy to see why the console is still being sold at a loss. That said, the disk-free nature of the system makes game sales more profitable, as Sony takes a larger cut from digital game sales. Sony will recoup the losses from diskless PlayStation 5 console sales with higher profits from game sales in the long run. 

Digital games are more profitable for Sony as they eliminate the material cost of game sales and cut out several middlemen within the world of game distribution. With digital game sales, money is no longer lost to game disk/packaging production, and both Sony and game developers will no longer need to share their profits with retailers. Beyond that, there is no used market for digital games, eliminating another way that Sony can lose revenue.  

Sony's £449 PlayStation 5 (Disk) hardware is now profitable - Is Xbox Series X?  

What about Xbox Series X? 

If Sony's premium PlayStation 5 can barely sell for a profit, it is unlikely that Microsoft can profit from Xbox Series X system sales, at least right now. With Microsoft selling their system for the same £449/$499 price tag as premium PlayStation 5 models, it is hard to see Microsoft not losing money from its Xbox Series X system sales. 

Xbox Series X is arguably the more powerful gaming system for starters, sporting a larger SOC and a stronger internal memory configuration. These factors make the SOC (CPU/GPU) portion of Xbox Series X more expensive to produce, and the fact that Xbox Series X requires more GDDR6 memory chips could make matters worse. 

On top of raw hardware specifications, Xbox Series X also ships with more storage than PlayStation 5, offering users 1TB of integrated memory instead of the PS5's 825GB. Sony uses less NAND flash within their PlayStation 5 console, which could help lower their production costs. 

The main factor that works against Xbox is the Xbox Series X's SOC size, which reduced the number of chips that can be manufactured using a single silicon wafer. This factor is doubly important, as these larger SOCs can also suffer from lower production yields, delivering even fewer usable SOCs from each manufactured silicon wafer. Between these two factors, Xbox Series X SOCs are more expensive to produce than Sony's PlayStation 5 SOCs. 


Sony's £449 PlayStation 5 (Disk) hardware is now profitable - Is Xbox Series X?
  

Does this matter? 

The short answer is no, as manufacturers do not create consoles to profit directly from system sales. Microsoft and Sony generate their gaming profits from game sales and subscription services, not hardware sales. Yes, having profitable system sales is a good thing for Sony, but at this early stage of the console generation, having more console sales is more important than having more profit from individual console sales. 

You can join the discussion on Sony's PlayStation 5 (disk version) hardware becoming profitable on the OC3D Forums

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Most Recent Comments

09-08-2021, 18:13:41

dazbobaby
Quote:
Digital games are more profitable for Sony as they eliminate the material cost of game sales and cut out several middlemen within the world of game distribution. With digital game sales, money is no longer lost to game disk/packaging production, and both Sony and game developers will no longer need to share their profits with retailers. Beyond that, there is no used market for digital games, eliminating another way that Sony can lose revenue.
The price hike to £70+ per AAA title is certainly a big help.
Negative I know, but it's a big price increase in one generation.Quote
Reply
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