I am sure you have read no end of opinions and ‘hot takes’ about the PlayStation 5 Pro. Today, however, we have found a set of opinions that should give gamers pause.
Takashi Mochizuki and Vlad Savory have a new story on Bloomberg collating industry professional opinions about the newly announced console and its pricing. At $ 700, and lacking an optical disc drive for physical games and even a vertical stand, no one expects the PlayStation 5 Pro to outsell the PlayStation 5.
But financial analysts they talked to seem to believe there is a logic behind this. Based on their summary, Sony no longer wants to sell consoles at a loss, to make money from software sales. Instead, they need to raise profit margin now.
For one, they cite the market change thanks to competition from mobile gaming, and possibly cloud gaming. Bloomberg analyst Nathan Naidu says subscriptions and ads are the dominant form of making money in video games now.
On the other hand, they believe hardware costs will no longer stop their increase. The proverbial Moore’s law may truly be dead, as there are no longer enough advancements in chip technology to make them cheaper to make over time. We’ll explain this another way.
The improvements in hardware from PlayStation 4 to PlayStation 5 are harder to see, compared to the improvements from PlayStation 2 to PlayStation 3. Because of Moore’s law, we used to see really big improvements. But with each console generation, those improvements have become smaller and smaller. That is what techies mean when they talk about Moore’s law being dead.
Niko Partners analyst Dan Ahmad pointed out that the PlayStation 4 Pro was only 15 % of total PlayStation 4 sales. Sony probably expects the PlayStation 5 Pro to fare similarly. So, they have priced the console beyond the average consumer, because they want to get the most return from the few PlayStation fans who can afford it.
Kyos Co.’s Naoko Kino raises an interesting question:
“I wonder if the industry needs more machine specs when there are not enough games taking full advantage of the current consoles.
It’s costly to make AAA games and, short of an unlikely future where games cost $100 or $200 a copy, I can’t see many making full use of increased power.”
However, the most concerning opinion out there likely comes from Japan-based MST Financial analyst David Gibson. He quoted Takashi Mochizuki’s story on Twitter, and said this:
“If you extrapolate- it means the PS4 was the peak in PlayStation user base/installed base….PS5 and PS6 will be smaller still. Why because 50% of the installed base of PS4 was at prices of $300 or less, a price PS5/Pro struggle to achieve. Sony have shot themselves in the foot”
Indeed, many gamers have expressed similar sentiments online. If Sony keeps raising the prices of their consoles with each generation, they will slowly price out their fans. They may keep their annual earnings up, or they may not. And if they do, will it be worth losing customers that can’t come back?
Now, let me do a reality check here. This article may seem to be fearmongering, but analysts outside video games say that there is no recession in the US, and there is no global recession either.
And as you may notice, none of the analysts said anything about inflation or recession affecting Sony’s choice. Even if consumer goods are getting more expensive, Sony chose to raise the PlayStation 5 Pro’s price themselves.
We do want to you to keep something else in mind. These analysts are paid to share these opinions to help industry people, such as investors, choose how to do their business.
In a way, you are also an investor in the video game industry, as a consumer. Your choices will determine how companies like Sony, Microsoft, Nintendo, develop and price their consoles and games in the future. You should also be armed with what knowledge these analysts will share in public, to help guide your decisions on what to buy and play.
You may not like what you read here, but this information should empower, not discourage you. Your hard earned money is more impactful than any financial analyst’s opinions. For that reason, you should wield that power carefully as well.
