Blog

Is Sony giving away the store with PlayStation 4?

Sony is certainly winning the PR war with Microsoft at E3, drawing sustained applause at its press event for the PlayStation 4’s $399 price point — a hundred bucks cheaper than the Xbox One — and praise from gamers for fully supporting used games.

Mike Wolf has a good post up arguing that the $499 price point for the Xbox One is neither surprising, given Microsoft’s earlier telegraphing of its intentions, nor too high, given its integrated Kinect controller and the willingness of the core game audience to pay up for new hardware.

I’d go further, and ask whether Sony hasn’t priced the PS4 too low.

In a Twitter exchange with Mike, Tested’s Will Smith argues that the video game market has changed “so dramatically” since the last generation of consoles came out that a $500 price is simply “not realistic.” In particular, as Mike acknowledges, the value proposition of dedicated game consoles has suffered as the variety and number of alternative gaming platforms such as tablets have increased.

The other side of that coin, however, is that as gaming increasingly goes mobile the realistic window for recouping the development and manufacturing costs of this latest — and probably last — generation of dedicated consoles is apt to be much shorter than for the previous generation, given that consoles are typically sold at a loss. Given that the PS4 actually has a more impressive spec sheet than the Xbox One, it’s hard to imagine that it can really cost Sony $100 less to manufacture the thing. Assuming roughly comparable development costs, that means Sony is likely losing more money on the PS4 and Microsoft is on the Xbox One, perhaps a lot more. While that might be justifiable as a way to build the install base if you look out 10 years, the console gaming market probably doesn’t have 10 more good years in it. If Sony leaves too much money on the table now, it’s going to be hard to go back and pick it up later if there is no later.

Even Sony’s embrace of used games, while certainly gamer-friendly, is probably going to cost Sony revenue in the near term. Used game sales don’t generate licensing fees for Sony the way sales of new games do.

Gamers may be cheering, but I wonder if Sony shareholders will be as thrilled.