The Xbox One’s light dwindled as the audience cheered with passion, not only because of the price but also because of the consumer-friendly policies (no used games DRM, no on-line game authentication). The fear that both the Xbox One and the PS4 would have some form of used-games DRM and that Microsoft and Sony were in cahoots with third-party publishers to take down the secondary market was a malaise that lingered among gamers. After Sony’s media briefing our minds were put at ease knowing that Sony wouldn’t try to dictate what we can and cannot do with our games.
Profitability? No one cared, we were all happy with the results, $399, a reasonable price for a console that represents freedom instead of a digital chain. As people walked out of the conference room the internet was being bombarded with positive messages and bold statements “The PS4 Won the Console war” ; but now that the dust has settled I think it’s time to ask the question. Is $399 too low for Sony’s own sake? Will the PS4 be profitable on day one?
Sony has stressed the fact that the PlayStation division HAS to be profitable; they cannot sell anything at a loss n this generation of hardware due to Sony’s brittle financial structure. Normally console manufacturers set a price point lower than the actual production cost, not only in an attempt to undercut competitors but also to ease the transition period from one generation to another, only after the fledgling console has mustered a reasonable amount of users and gathers a decent market share to attract third-party publishers can they expect to start making a profit from software (games) licensing.
But Sony has taken a different road this time around, a riskier one, and yet they came out on top, they have a hardware that is slightly more powerful than Microsoft’s and according to Michael Pachter Sony is almost certainly making a profit from the $399 price point which, by the way, is $100 lower than the Xbox One’s.
Wedbush Morgan analyst Michael Pachter
Consumers and press have reacted positively the price of the new system which will retail for $399 in the US and £349 in the UK. However, stakeholders seem to be concerned about the price and whether Sony will take a loss.
Last year Sony’s profits took a nose dive with profits plummeting from $310 million to $18 million; as a result the company reduced the expected profit margins from 8 per cent to 2 per cent.
“The balance of everything we do, whether that’s the console, the software, the accessories or the digital business, it all needs to be profitable and we expect it to be profitable in the short term and the medium term.”
Regarding Sony’s conference Gara stated that:
The competition is not over yet. In fact, this is just the beginning. You can be sure that Microsoft will do everything in their power to capture a large market share, we just don’t know what their next step will be.
Another issue is the price of games, when asked if first-party titles will see their prices increased Gara said:
I’m convinced that AAA games will launch at the same $60 retail price point during the first year but as we move further into the new cycle I believe that prices are likely to increase due to the fact that publishers will try to boost their average revenue per user through DLC and micro-transactions which could add up to $80-$90 per title.
