The PlayStation 5 is expected to turn a profit after next month, less than a year into the console's lifecycle.
In a recent investor's meeting, Sony Interactive Entertainment says the PS5 standard edition is expected to break even in Fiscal Year 2021. Sony has focused strongly on console production costs and cut corners where it can (as per Mark Cerny, the PS5's limited SSD storage is a result of cost control) securing big multi-million wholesale part deals in the process.
"Another area that we focused on was our console economics. I am pleased to say that the PlayStation 5 standard edition will break even from next month's production. And from then on, we project that it will become increasing profitable," Ryan said.
"From the last generation to this generation, the importance of console economics to our overall business model has steadily diminished."
Ryan also confirms the PS5 standard edition makes up the vast majority of console sales, which currently sit at 7.8 million.
"Right now the standard edition represents the very great majority of PS5 sales. We do not see that proportion changing greatly in FY21, but we anticipate as this time passes there will be some slight increase in the ratio in the digital edition, but not significant," Ryan said.
The president also highlights just how much digital services have grown since the PS4's inception:
"At the start of the PS4 cycle, console represented nearly half of our total revenue base. Now it's only 1/5th as our network service and digital distribution business has grown rapidly."
Traditionally both Sony and Microsoft sell their consoles at a loss and recoup the costs from software, services, and 30% commissions from third-party games. Microsoft says it has never sold an Xbox console at a profit, whereas Nintendo made the Switch to be profitable from the start. Now Sony says the PS5 is ready to break even as the PS5's cost of goods significantly drop throughout FY2021.
The PS5 being profitable now is a very big deal for Sony. The company is preparing to release the largest number of consoles throughout 2022-2023 and is currently ramping up production to meet that demand. The hope is to deliver more than 14.8 million PlayStation 5's next year.
Sony expects FY22 to deliver more consoles than any other period in PlayStation history.
- Sony will sell more PS5s next year than any other PlayStation console
- Sony to spend lots more on game development, Jim Ryan says
How will Sony produce more PS5s during a chip shortage?
Sony is moving the PS5's SoC from 7nm to the 6nm process. TMSC's 6nm process is technically part of the 7nm family and it's very easy to go from the PS5's current 7nm+ over to 6nm. The benefits of N6 (or 6nm) are faster yields and quicker production times, meaning Sony can produce more chips and thus make more consoles available. By 2022, Sony will have PS5s being made on two processes.
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