When the PS5 was released, it had to live up to high expectations, especially in light of the PS4’s tremendous success the previous generation. Thankfully, Sony’s latest generation of consoles has vastly improved upon its predecessor in every regard. The PS5’s new DualSense controller is a technological marvel, thanks to its haptic feedback and adjustable triggers. The PS5 is an upgrade over the PS4 in many ways, including its modern user interface, lightning-fast load times thanks to solid-state drives, enveloping 3D audio, and very potent hardware. To sum up, everything I just said, the PS5 is incredibly addicting. Its tremendous demand keeps its price in flux; here’s what it’s expected to be in 2023.
Sony may have hoped the news from Gamescom would lessen the blow of announcing a price increase for the PS5 in most worldwide countries this week, instead of in one of the summer’s more slow weeks, thus they posted the announcement on the PlayStation blog earlier this week. Unfortunately, I’m not convinced it was successful; this week, everyone seems to have nothing else to speak about than the recent price increases.
Let’s discuss price increases, not just Sony’s but the larger subject of the upward pressures on the industry’s pricing that has been brought into pretty clear focus by Sony’s move. There’s a lot of outrage among consumers over the PS5 price hike, and some gallows humour about how it doesn’t really matter to people who can’t even find a PS5 to buy, but this isn’t the first price increase we’ve seen in recent months, and it’s not likely to be the last.
The PS5 price rise is far less than the 25% increase in the price of Meta’s Quest 2 headset that occurred just last month. While that 25% increase in price for an already pricey piece of gear is perhaps an aberration, the general trend of price hikes is only getting started, and more modest gains are expected to be seen across the board.
Some companies within those supply chains are taking advantage of the broader inflationary climate to sneak in some profit margin increases, but generally speaking, it is not the game companies at the consumer-facing end of the chain who are doing so.
There are other contributing factors besides inflation. Uncertainty in the currency markets is a major factor in the United States not seeing a price increase for the PlayStation 5 despite inflationary pressures. For American consumers, a strong dollar acts as a hedge against inflation, whereas the relative weakness of currencies like the Euro and the Yen forces higher prices on those regions’ consumers.
Some of the most vulnerable consumers are located in emerging economies with weak currencies, such as Australia and New Zealand, where the cost of gaming hardware and software has historically been higher than in more established markets such as the United States.
The price increases that have recently been passed on to customers are due to a confluence of factors, most of which are beyond the control of the decision-makers at gaming hardware and software firms. There is a wide range of industries that are either directly or indirectly connected to the gaming industry experiencing severe inflationary pressures that show no signs of abating in the near future.
Joking aside, there is some truth to the assertion that consumers who can’t find a console already aren’t going to care about the PS5 price increase. The fact that scalpers are still able to demand a premium for limited supplies of the system suggests that the market will likely absorb Sony’s price increase without causing a noticeable impact on the sales curve for the gadget, at least initially.
If Sony is fortunate, by the time supply begins to meet demand on a regular basis, inflation will have been brought under control and a price cut will be possible, bringing the console back to its original RRP or even below. This would prevent the PS5 from being significantly overpriced in comparison to its closest rival, the Xbox Series X.
It’s also possible that by the time the PS5’s price goes up, it will have been absorbed into the overall trend of rising consumer pricing caused by a cascade of comparable rises in costs throughout this and related industries.
In some cases, new, higher prices won’t appear on the tags of already-existing products. To avoid the backlash that would be inevitable if they just raised prices across the board, many consumer electronics manufacturers are instead adopting a more nuanced strategy of keeping prices steady for old items while launching new devices or upgraded versions at higher price points.
Sony would have to wait at least another year or two before releasing updated PS5 hardware, so this isn’t a viable option. It’s possible Microsoft’s initial aspirations to consistently improve the Xbox Series hardware with incremental changes have also fizzled out.
Although of the three console platform holders, Nintendo has historically been among the least resistant to preserving its margins by bumping local prices in response to currency fluctuations, the company may be able to shunt off its inflationary price rises onto the launch of a new Switch revision instead of increasing the price of existing models.
Consumers in the market for new consoles or other devices are particularly affected by increases in hardware prices, but these increases have repercussions throughout the industry as a whole. Especially considering that they occur during a time when household incomes are being squeezed on many fronts, they have the potential to restrict the addressable market for the larger business.
Whenever a family reevaluates its financial situation, the console, smart gadget, or graphics card that costs the most will go to the bottom of the list. A price increase for software, on the other hand, might have a far more widespread effect on the market. Many indicators point to the likelihood of price increases in the near future.
This shouldn’t be shocking, but it will likely be a rude awakening for many shoppers. The cost of developing games also increases steadily and continuously as they get more complicated and technically demanding, putting software under many of the same inflationary pressures as hardware.
When adjusted for inflation, even the occasional $10 price hikes associated with the debut of new console generations have resulted in historically low prices for video game software in recent years.
Games are now sold at a much wider variety of price points, with season passes and digital special editions becoming standard for higher-end releases, and bolt-on business models like microtransactions helping to bridge some of the revenue gap. This complexity in the structure of pricing has helped to cover up the upward pressures on software pricing during those decades rather than by headline price rises. However, in the face of sudden inflationary pressure, that approach may not be sufficient; increases to the top line are anticipated, and it would not be shocking to see them begin even for this Christmas’ significant releases.
Customers will be upset about software price increases even more than they are about hardware price increases (those who already own consoles and high-end graphics cards won’t care about hardware price increases anyhow), especially considering the current state of their own financial situations.
This frustration will be amplified in areas where price increases have been particularly severe, such as Australia and Europe. If businesses are unable to adjust prices to account for inflation, they may resort to less popular post-sale monetisation techniques, such as releasing polarising downloadable content (DLC) on release day.
With prices rising even as disposable incomes decrease, no reasonable compromise exists. Since the funds must come from somewhere, the best that can be hoped for is that corporations will settle on an unpalatable solution that would at least limit the damage and preserve the sector’s long-term possibilities for growth.
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