Wedbush Securities analyst Michael Pachter recently painted a wild price tag on Sony’s next-generation PlayStation 5 console. He said that the Japanese giant could price the successor to the PlayStation 4 at a whopping $800.
Such crazy pricing could kill Sony’s next PlayStation. But the company has dropped a hint that it could be heading that way.
What’s Sony trying to do?
According to information obtained by the Wall Street Journal, Sony CEO Kenichiro Yoshida has revealed that the company will position the PlayStation as a niche product aimed at serious gamers.
He reportedly said at a company briefing that “details when making games have become more important than ever.” Yoshida also added that the next-generation console will come equipped with ray-tracing technology, which can create life-like optical effects in games.
All of this will be possible because the next PlayStation console will “dramatically increase the graphics-rendering speed” thanks to high-end hardware. Sony has made it clear that it will focus on titles with big budgets to drive profitability in the gaming segment instead of looking to move more numbers.
This looks like a smart move at first. The PlayStation division accounts for a significant chunk of Sony’s revenue and profits. The company generated $3 billion in operating profit on $21 billion in revenue from the PlayStation segment last fiscal year.
The annual revenue of the PlayStation unit increased 19% annually despite a drop in hardware sales, which indicates that gaming software sales and PlayStation Plus subscriptions drove its performance. So Sony is looking to deploy a similar strategy with its next console, wherein big-budget titles will drive its profits instead of device sales.
That’s the reason why Sony could be looking to price the PlayStation 5 at a premium thanks to its powerful specs. But this ploy of selling less PS5 units and relying on AAA titles to drive profitability could backfire and kill the device on arrival.
A miscalculated move could kill the PlayStation 5
Restricting the PS5 to a niche audience could be a big problem. Video games research provider Newzoo has classified gamers into eight categories. A bird’s eye view of those categories indicates that the majority of gamers don’t fall in the hardcore category that Sony is targeting.
Just over a third of the gamers belong to the hardcore category according to Newzoo’s classification. These include those types of gamers who will spend money on hardware, though to varying degrees. For example, only 9% of the gamers are hardware enthusiast who will keep up with the latest machines, while 13% belong to the “ultimate gamer” category that spends all of their money on games.
On the other hand, 46% of gamers belong to the “time filler” and “cloud gamer” category. The time filler plays a game only when he or she has to kill time, while the cloud gamer inclines toward streaming services and doesn’t believe in spending a ton on hardware.
This is where Sony might miss out on a trick with the next PlayStation console as its rivals are gearing up for the cloud gaming era. Microsoft’s Xbox Two will reportedly have two variants, one of which will be a cheaper streaming box that will beam games straight from the cloud.
Similarly, Nintendo is said to be testing cloud gaming on its Switch console. Sony’s competition is looking to tap into a much wider universe of gamers by supporting more than just big-budget tiles that requires premium hardware.
This could pose a problem as focusing on the premium end of the market with a costly console and pricey games could price out a big chunk of gamers and dent sales of the PlayStation 5.