In a recent earnings report, Sony explained why there’s been so many stock shortages for the PlayStation 5. The hotly-anticipated new console technically released in November 2020, but most of the gaming world wouldn’t know it: you can’t really buy one right now unless you’re particularly lucky.
That’s because the shortages of the stock, combined with extremely high demand from scalpers and gamers alike, have cleared the console out of online retailers. Unsurprisingly, Sony’s new system hasn’t been stocked in brick-and-mortar retail stores, with sales being limited to online-only. So, what’s going on with the PS5? Why can’t you find one?
It feels boring to write it out plainly, but there’s been a semiconductor shortage. This has affected numerous technology manufacturers, including Qualcomm and Apple, as well as Microsoft and Sony.
The situation has created a stumbling block for Sony in two ways. One, it’s much harder to create enough PS5s to meet demand, leading to stock shortages and frustrated would-be customers.
The other effect, which has been hitting their bottom line from a different angle, has been the increasing price of the hard-to-find parts. Currently, it’s likely that Sony is selling the PS5 at a loss, if not nearly a loss, due to the expensive internal components.
In spite of this, Sony’s recent financial numbers show that the company sold some 4.5 million PS5s through the end of 2020. This is a success by any measure, and it likely represents a near-complete sell-through of every unit manufactured that year.
Sony Comments on Shortages
“It is difficult for us to increase production of the PS5 amid the shortage of semiconductors and other components,” Sony CFO Hiroki Totoki told investors during a briefing that accompanied the financial numbers. “We have not been able to fully meet the high level of demand from customers [but] we continue to do everything in our power to ship as many units as possible to customers who are waiting for a PS5.”
Sony may have also targeted the $500 price point for the normal edition of the PS5 due to pressure from Microsoft. Their main competitor waited very late in the console reveal cycle to announce the prices for their two Xbox variants: $500 for the Series X, $300 for the Series S.
This may have convinced Sony to set the “strategic” price of the PS5 lower than they otherwise would have to recoup some of the production costs.
Software and Subscriptions
The earnings report indicates that software sales and subscriptions are the two biggest income streams for Sony currently. The vast majority of PlayStation owners have a subscription to Sony’s PlayStation Plus service, which allows users to play online.
This is essentially guaranteed revenue for the company, which hopes to use this consistent income stream to offset the losses incurred in selling the PS5 at such a low price point.
So, with a captive audience at home eager to snap up PS5s as they hit store shelves and a huge number of players relying on digital game purchases to get their titles, Sony is well-positioned for the upcoming year. Now, if only they could produce a few million more PS5s to meet demand, they’d truly have it all.