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Sony is selling the PS5 at a loss, investors told

‘Strategic price point’ on new console is lower than manufacturing costs

The PlayStation 5 laying on its side, turned on, showing a blue light at its edges Photo: James Bareham/Polygon
Owen S. Good is a longtime veteran of video games writing, well known for his coverage of sports and racing games.

Sony shipped more than 4.5 million PlayStation 5s from the console’s Nov. 12 launch to the end of the year, but it took a loss on those sales because the PS5’s “strategic price point” is lower than what it cost to manufacture it.

The disclosure was part of Sony’s quarterly report to investors, delivered in Japan earlier today. The losses on PS5 sales were not specifically broken out — and they were part of an overall Game & Network Services Segment that saw a 26.7 billion yen ($2.5 billion) increase in operating income over the same quarter in 2019.

Sony’s PlayStation revenue from game sales (both PS4 and PS5, add-on content included) plus larger profit margins on the outgoing PlayStation 4 more than made up any shortfall, the company said.

By comparison, the PlayStation 4 sold more than 4.2 million units from its November 2013 launch to the end of that year. The company in November said the new PlayStation 5 is facing “unprecedented” demand, making its availability scarce, even though more PS5s have been available, in whole numbers, than their predecessor. Microsoft’s Xbox Series X has faced the same issue, with the company’s chief financial officer telling investors back in November that a console shortage could last until April.

Bloomberg reported as far back as February 2020 that scarce components had driven the manufacturing cost of the PlayStation 5 to $450. Analyst Michael Pachter, in an October interview, speculated that Sony would break even on the $499 PlayStation 5, but lose money on the $399 Digital Edition that lacks an optical disc drive.

Elsewhere in Sony’s financial report, the company increased its forecasted sales and operating income for the PlayStation division over the fiscal year ending in March. Sony now expects another 30 billion yen ($285 million) in sales from its Game & Network Services segment, and an additional 40 billion yen ($380 million) in operating income for the year.

Sony also reported a PlayStation Plus subscriber base of 47.4 million users, with 114 million monthly active users of the service as of the end of the year.

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