Sony: Interactive Entertainment’s CEO, Hiroki Totoki, recently addressed the challenge of implementing a significant price reduction for the PlayStation 5 (PS5) as the console progresses into its later stages of the lifecycle. Totoki explained during an investor call, as reported by IGN, that reducing manufacturing costs for the PS5 is notably tougher compared to the company’s efforts with the PS4.
He emphasized the difficulty in minimizing the PS5’s die size, which limits the potential for cost reduction. This constraint contrasts with Sony’s previous successes in lowering production costs for the PS4. Totoki clarified, “Therefore cost reduction is very difficult, simply put.”
A major obstacle Sony faces is the substantial expense associated with shrinking the PS5’s die size compared to similar endeavors in the previous generation. This situation leaves little flexibility for cost adjustments, with potential reductions likely limited to storage components. Adding to the challenge is the rising cost of components in the market.
The original PS5 debuted at $499, accompanied by a digital-only variant priced at $399.99. Subsequently, the PS5 Slim entered the market at $499.99, featuring a cheaper digital-only option priced at $449.99.
During the financial call, Totoki stressed that Sony aims to maintain profitability without relying heavily on price cuts for the PS5. He stated, “We want to make sure our business is profitable, as well we want to focus on user engagement, together with sales of units.” Totoki highlighted the importance of striking a balance between profitability, user engagement, and sales.
Sony’s focus on sustaining user engagement is evident, with monthly active users (MAUs) serving as a critical metric. Totoki noted a record high of 123 million MAUs in December, accompanied by a 13% increase in total play hours year-on-year.
Despite strong engagement metrics, Sony has adjusted its PS5 sales forecast for the current financial year, lowering it from 25 million to 21 million units. This revision comes despite a year-on-year increase in PS5 sales during the holiday quarter of 2023, rising from 7.1 million to 8.2 million units sold.
