2020 is the year where console gamers are expecting the ninth generation to be released. Yet whether or not gamers are ready to shell out hundreds of dollars for a new system, the coronavirus outbreak could throw a wrench into the gears. Considering the effect it is having on China’s economy and manufacturing, I can’t help but wonder if the Coronavirus outbreak will affect the price for Sony’s PlayStation 5 and Microsoft’s Xbox Series X and possibly delay the release date for both systems?
Right now, we are seeing a repeat between Sony and Microsoft when they were preparing to announce the price and release date for the PlayStation 4 and Xbox One. While It really is hard to believe that only seven years have passed since the PlayStation 4 and Xbox One were released back in 2013, It is a short time considering that the seventh generation lifespan lasted for 11 years (2006-2011). But during 2013 we saw Sony waiting to see what Microsoft would price the Xbox One ($500) at before announcing the price for the PS4 ($400).
And we saw the results of that decision.
The PlayStation 4 has dominated the current generation of consoles with 106 million units sold since Dec 2019 while the Xbox One…well…Microsoft stopped announcing sales numbers after the first year though estimates place it at around 30 million to 50 million units sold back in January 2019. But it is that $500 price point that seems to essentially be the death knell for consoles. After all, just like this current generation, the roles were reversed when Sony’s PlayStation 3 20 GB console was priced for $500 and Microsoft’s Xbox 360 for $400.
During that generation it was Microsoft that dominated the sales until Sony started offering its console for cheaper. The cheaper price, coupled with the Xbox 360’s Red Ring of Death debacle, resulted in Sony pulling ahead in sales towards the end of the eighth generation’s lifespan.
When the dust had cleared, the PS3 had sold 87 million units and the Xbox 360 84 million units.
Fast forward to 2020 and we are back in familiar territory. Right now Microsoft is talking about how the upcoming Xbox Series X is going to be a powerhouse while Sony is being coy. Sure, there are editorials out there saying that if you adjust for inflation, it makes sense that a $500 price point is reasonable (it’s not). While that may be the case, for many consumers that price tag is setting up the console for failure and low-rate of adoption until the price is lowered.
In a nutshell, the pattern is there for the past two generations. Majority of gamers balk at the $500 price tag but are then willing to jump on board when the price goes down. A sentiment that most likely will not change with the next generation no matter what the specs are for the competing consoles. Even with the economy in the best shape it has been in the last 50 years with skyrocketing stocks and bottom-of-the-barrel unemployment numbers for all demographics under the Trump administration, that $500 is still not an appealing prospect to the majority of gamers.
Especially when it feels like Sony and Microsoft can still push the limits of the PS4 and Xbox One.
You would think that Sony and Microsoft have learned their lesson, but that doesn’t appear to be the case. According to Bloomberg Tech, Sony is struggling with the price for the PS5 due to expensive parts that makes the base cost for a unit to be around $450. Microsoft, on the other hand, makes it sound like the Xbox Series X is going to be a powerhouse, twice as powerful as the Xbox One X, and while speculation is that it will be priced at $500, nothing has been confirmed yet. However, considering that the Xbox One and the Xbox One X have both retailed for $500 at launch, it won’t be surprising to see the Series X priced the same at launch.
But it would be baffling. Especially since Microsoft has been quiet about the sales figures for this current generation. However, one could argue that Microsoft appears to have been using this generation of consoles to acclimate consumers to the $500 price point.
Considering that, would consumers adopt the next generation if both consoles are priced at $500? It’s an interesting question to consider, but not the point of this editorial though I would speculate that the majority of gamers would hold back and wait for a price reduction if that were the case.
Despite costly parts and high specs driving up the price for the ninth console generation, there is the coronavirus factor to consider. I can’t help but wonder whether or not it will affect the price and even the release date for the PlayStation 5 and Xbox Series X. While the demand for certain parts such as DRAM and SSDs will increase in price, the Covid-19 outbreak in China could drive prices for those parts, and everything else manufactured for the console up quite a bit.
Last month, the Chinese government mandated factory shutdowns, resulting in about half of the industry closing down, and have been shutdown until recently. But now China is trying to get its citizens to go back to work in the factories risking a renewed spread of the coronavirus which has claimed the lives of 2,600 people and infected around 76,000 at the time of this editorial being posted.
As a result of the outbreak and shutdown of its factories, companies such as GPU-maker NVIDIA is projecting a $100 million loss, Valve’s production schedule for the Valve index has been affected, there will be a Nintendo Switch shortage, and Apple has warned consumers of a potential supply shortage of the iPhone. As other cell phone companies start to make similar announcements, this means that competition for various parts will heat up and drive those prices even higher.
So what does that mean for Sony and Microsoft? It means that, if the coronavirus continues to be a debilitating factor heading into the start of spring, when manufacturing of the new consoles would presumably start, then prices for various components are going to increase and the number of consoles produced will decrease.
At that point, both companies will have at least four options in front of them. The first option is to increase the price of the console over $500 in order to make a profit for each sale. Second option is to keep the price at $500 or take the loss on each sale by lowering the price. A third option would be to release the consoles this year but at a far lower target goal of units than they were expecting to have manufactured by holiday 2020. The fourth option would be to delay the release of the consoles in order for the cost of production to drop and to also provide their target goal of units to the market for purchase.
Obviously, it all depends on how much longer the Coronavirus/COVID-19 will continue to stick around. But with spring just around the corner, and no end in sight to this outbreak, things are not looking good for Sony and Microsoft. As things stand right now in China, I see both companies delaying the release of their consoles to 2021. I can’t imagine either one would want to try and price their console at over $500. That would be committing retail suicide since they will have a hard enough time trying to sell a new console at the $500 price point.
It doesn’t matter that some video game click jocks like to say, “adjust the price for inflation.” The fact of the matter is that $500 is $500. For a lot of gamers, that is beyond the limit of what they are willing to spend for a new console.
But what do you think? Sound off in the comments below!
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