If you’re wondering just how cut-throat the console business is, consider this: every single $749 PS5 that’s been released in Australia, and however much it cost around the world? Sony has lost money on every single one.
The harsh financial truth was revealed in Sony’s latest financial earnings, where the company provided details on the success of their various divisions over the 2020-2021 third quarter. Obviously, with the PS5 sold out everywhere, sales have spikes substantially.
But sales aren’t the full picture. In a slide discussing the breakdown of Sony’s Game & Network Services Segment — the part of Sony’s business that PlayStation sits under — the company revealed that the PS5 was sold below cost.
“Loss resulting from strategic price points for PS5 hardware that were set lower than the manufacturing costs,” the slide says. It didn’t stop Sony from enjoying a 40 per cent increase in sales to 883.2 billion yen, and a 26.7 billion yen year-on-year increase in operating income.
That said, Sony still enjoyed an increase in operating income and sales over the period courtesy of better sales of peripherals, improved margins on PS4 hardware, an uptick in PlayStation Plus subscriptions, and more game, DLC and microtransaction sales. PlayStation Plus was especially successful: 87 per cent of PS5 users have taken up a PS+ subscription, and Spider-Man: Miles Morales has sold 4.1 million copies from November to the end of December.
Sony is still hoping to sell over 7.6 million PS5 units by the end of their fiscal year, although they warned that “we have not been able to fully meet the high level demand from customers”.
Another element to keep in mind is that consoles become cheaper to manufacture. As consoles age, supply for their various components becomes more plentiful. Newer consumer tech will also begin to be produced on more efficient process nodes over time, making it easier for Sony to make the PS5 (and in turn, the Xbox Series X) more broadly available.
This also isn’t the first time Sony — or a console manufacturer — has sold launch hardware at a loss. Sony did exactly the same thing with the PS4, betting that a strong user base and increased margins on software sales would make more money in the long-term. Sony booked $US3.5 billion of losses on the PS3 in its first two years as well, although that was partially because the PS3’s high pricing meant hurt initial sales. But a couple of years after the PS3 launched, Sony had gotten the cost of manufacturing down by 70 per cent to $US240 per console.
Sony also briefly touched on their Crunchyroll acquisition, saying the deal would help them distribute Aniplex titles — makers of series like Demon Slayer, Sword Art Online, Fate/Zero, God Eater, Eromanga Sensei, and more.
“Consumer interest in Japanese anime is increasing rapidly, particularly outside of Japan, and, as a company that currently owns both content and a direct-to-consumer (‘DTC’) streaming service, we have positioned anime as a focus area,” Sony said.