The PS4 came out way back in 2013 so why is it so expensive now? The PS4 is one of the best selling consoles of all time but that doesn’t explain the high price, so I researched the internet trying to answer this question.
The PS4 has sold 111 million copies and is the fourth most successful video game console of all time. Sony does not need to drop the price as even a $50 drop will lose Sony a lot of money and reduce their profits, the PS4 is still selling well so Sony will keep it expensive.
I know its crazy that the PS4 is barely cheaper now than at launch in 2013 priced at $399, I will explain why consoles, in general, are so expensive, it is super interesting so read on to find out.
Take a look at the bargain prices for a PS4 on eBay here or see the latest PS4 prices on Amazon below.
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Why Are Consoles So Expensive?
Consoles take years of product, research & design to make and Sony spent $3.2 billion making the PS3 alone! It is common to sell consoles at a loss as companies make the costs up by software licensing and digital purchases.
I bet you thought console companies made megabucks selling consoles right? Well, you would be wrong/
It is common practise for gaming companies to sell consoles at a launch at a loss each PS3 cost Sony over $800 to produce! This is why the PS3 launch price was $599 and didn’t do well to start.
Year of research and development goes into creating the right console, it isn’t as simple as we need X amount of parts, countless hours are spent in research, design, engineering and testing thousands of different components and ensuring everything fits together under one pretty little package.
These costs add up Microsoft spent over $100 on the Xbox One controller that is an EXPENSIVE controller am I right? Even crazier is the Xbox One controller is very similar to the 360 controller so where did this money go?
To top it off Sony spent a ridiculous $3 BILLION dollars on the PS3! If you spent that much on your product, you will understand why making it cheaper isn’t in Sony’s best interests.
Cost Of Console Hardware
Even after the millions upon millions and in Sonys case billions of dollars spent on a new console, the hardware costs themselves add up.
Nintendo spends $40-$50 on the Switches Tegra X1 chip and the Joy-cons cost $45 each to produce, with the switches GPU being $200 dollars. Moreso than the PS4 I don’t think the Switch will ever get cheaper as Nintendo themselves don’t have the stock to meet demand.
Sony makes $18 on each PS4 sold which is very good for a console as the original PS4 release was $399 and the original manufacturing cost was $381.
The original Xbox One cost $457 per unit with a $14 manufacturing cost and was sold at $499, giving Microsoft a $28 profit per Xbox One sold.
The IHS estimates that each Xbox One console carries a hardware cost of $457 per unit and an additional manufacturing cost of $14, making the device a $471 machine to produce wholesale. An Xbox One costs $499 in the shops, so that’s a $28 difference.
You might say but they are still making a profit on each unit sold right however factor in shipping and other retail costs and companies are still making a loss,
So how on Earth do they make any money?
3 Ways Gaming Companies Make Money
1.Console Manufacturing Costs Go Down Overtime
As manufacturing costs with companies that produce consoles components improve, the costs go down so gaming companies make more per console further down the consoles life span.
All gaming companies have contracts with electronic manufacturers, as these relationships improve companies like Sony can negotiate and get a better price per unit sold, even a small price reduction like $10 will have a MASSIVE impact on Sonys profit margin.
Unfortunately acquiring these materials put a MASSIVE cost on the environment, to see if the Nintendo Switch is environmentally friendly check my post here.
This generation of consoles are made at a profit which is unusual for gaming consoles, the last generation was particularly bad for Sony as the PS3 cost $840 to make netting in a $21 loss for each PS3 sold, not even including other costs like transportation and sales!
Even if Sony reduced the PS4 cost by $50 as Sony have sold 110 million PS4s this would lose Sony billions in revenue, a loss they just cannot take.
The Xbox 360 retailed for $299.99 and cost around $310 to build only costing Microsoft $10 for each 360 whilst the Wii U unusually for Nintendo was also sold at a loss the gamepad cost more than Nintendo thought and Nintendo didn’t want to price out customers with a too expensive product.
Even earlier the PS1 was sold at a $80-$100 loss, so how on Earth do companies make money!
2.Gaming Licensing
Games come under two different categories first party and third party. First party means a study or game funded by the console manufacturer themselves and third party are games or studios that have no direct links to the console.
First-Party Games
Nintendo and the PS4 are famous for first-party games, as this is why Nintendo games are so expensive, picture games like Mario or Zelda and the ONLY way you can play them is using a Nintendo console. Nintendo get all the money from these games, and since it’s a limited supply the prices stay high.
Sony get around $27 per first party game sold not bad at all.
First party studios are the reason PS4 did so well, the PS4 is blessed with countless games that are only playable on the PS4 like the Last Of US 1&2 Horizon Zero Dawn, BloodBourne etc. To see my personal pic on the best 42 PS4 games check the link.
1st party games are cool as they are the sole reason you would buy a PS4 over an Xbox One or a Nintendo console at all, however third party is where the true money comes from.
Third Party Games
Any gaming publisher that wants to have their game on a console actually has to pay the console developer money! Crazy right? It’s like paying an art gallery money to show your painting.
It is estimated that roughly $7-$12 is paid to the game developer per $60 game sold, when you realize the PS4 1 billion games as of January 2020 that is 7 billion dollars in revenue! CRAZY right?
The PS4 got off to a great start with fantastic exclusives but Microsoft always lagged behind, it is so important for gaming publishers to secure third party rights for popular games like Call Of Duty otherwise they would lose so much money.
Microsoft spent a ridiculous $2.5 billion on acquiring the rights to Minecraft as well in acquiring numerous first-party studios like Obsidian entertainment and inXile in order to compete with Sony in the next generation. Microsoft knows the only way to compete with Sony’s next-generation is to improve its lacking first-party games.
To see why PS4 was so successful and why the Xbox One failed, please check out my post here I put a lot of effort into it.
You see why Sony would not reduce the price on the PS4 as they suffer such huge losses at the start of a consoles life cycle and only over time do they recoup these losses.
However the REAL money make is in digital purchases.
3.Digital Purchases
The secret to getting rich as a normal person is selling products that cost the same to product no matter how many sell, it is the exact same thing for video game companies!
Sonys PlayStation network made over 12 billion in 2019 including the sales from PSN and digital downloads and games! With around 4 billion from PSN revenue that is more money than Nintendo made as an entire company!
Whilst Microsoft made $2.05 billion from Xbox Live in 2019 as new Xbox Live user increase Microsoft makes money from their own inferstructure just like Sony.
Despite all these money from non hard ware sales, you can see why companies will not console consoles aside from Microsoft who were struggling to sell the Xbox one. The PS4 and especially the Nintendo Switch prices will not change until the new consoles come out.
PS4 is one of the best consoles ever made grab yourself a used PS4 for a a steal on eBay here or read real customer reviews on Amazon below.
