PS5 Production Costs Exceed Its Price

One sentence included in Sony's latest financial report indicates that the Japanese company is selling PlayStation 5 consoles at a loss. The production costs of a single unit are higher than its price.

IN A NUTSHELL:

PS5 production costs are higher than the price paid by the customers;
The same was the case with many other consoles, including PS4, Xbox One, PS3;
The information appeared in Sony's financial report.

Sony presented the financial report summarizing the last quarter of 2020. Thanks to the document we got to know the sales figures of PlayStation 5. We also learned that the Japanese company sells the mentioned platform at a loss - the cost of production and delivery of a single device to stores is higher than the amount paid by customers.

Infographics from page 16 of Sony's report. Source: https://www.sony.net/SonyInfo/IR/library/presen/er/pdf/20q3_sonypre.pdf

It is worth noting that similar information has already appeared before - in February 2020, the media reported that the PS5's cost of production is about 450 dollars, which had to do, among other things, with the poor availability of certain components. In turn, in October, the well-known analyst Michael Pachter speculated that Sony is likely to "break even" with the basic model of the console, but will incur losses selling the Digital Edition variant without the disc drive.

It should be noted that selling gaming equipment at a loss is not unusual in the industry. The cost of manufacturing and delivering a single PlayStation 4 to retailers was also initially higher than the price we had to pay for the console. It was most likely the same for Xbox One. The record-breaker here may be PlayStation 3, which didn't start turning a profit until mid-2010, more than three years after the release.

Of the well-known companies, probably only Nintendo generally tries to make money on the sales of its platforms. Other manufacturers accept certain losses in order not to increase the price of the equipment too much and thus enable sufficiently high sales. In the first years after the launch of the console, money is earned mainly through games (especially digital versions), add-ons and microtransactions.