There's good reason to predict the upcoming Sony PlayStation 5 will be more expensive than the PlayStation 4 was at launch. The company has been tight-lipped about anything pricing related for the PS5 thus far, and we may now know why.

As of this writing, Sony has only released the bare minimum of details on its next console. The company hasn't spoken publicly about any upcoming games, hasn't shown any hardware designs, and, with the recent announcement that Sony will be sitting out of E3 2020, no one knows when its next PS5 presentation will be. The only concrete information from Sony has been related to the guts of the PlayStation 5.

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Mark Cerny, lead system architect of both the PS4 and PS5, has openly discussed that the new machine will use an SSD instead of a hard drive for storage and boast enough RAM and processing power to reliably handle ray tracing at the hardware level. Simply put: it'll be much more powerful than the PS4, but it will also be much faster, and that speed comes at a cost.

The primary components for producing speed and responsiveness in modern hardware are flash storage and RAM. Per a Bloomberg report of an earnings call with Sony, memory and flash storage (in the PS5's case, this would mean its SSD) are in short supply due to the ubiquity of high-end smartphones. The demands of companies like Samsung and Apple outweigh the needs of a console manufacturer like Sony, and they're now uncertain if they'll be able to buy the components they need while paying a reasonable price and meeting their supply numbers for the initial launch. If RAM and memory prove to be as expensive as Sony says, the PS5's retail price will likely be higher than expected to offset those production costs.

Console hardware pricing has proven to be incredibly important to the success of a gaming machine. The original PlayStation 3 launched at an absurd $599 price point, a full $100 above the price of the highest-end Xbox 360, and that choice almost sank Sony's ship entirely. It would take years of price cuts, hardware revisions, and blockbuster exclusive games like the Uncharted series for PS3 sales to finally catch up to Microsoft's Xbox 360 in the early 2010's. By comparison, the PS4 retailed for $399 upon its November 2013 release. It was $100 cheaper than the competing Xbox One, and has maintained a hard-to-overstate sales lead over Microsoft's console even to this day.

As a result, Sony has already stated they'll decide on a retail price for the PlayStation 5 after Microsoft announces prices for the Xbox Series X. The logical assumption is the PS5 will retail for the same price or less than that of the next Xbox. Currently, Sony is having difficulty getting the PS5 price under $450 per unit, so they'll have to adapt their business model if Microsoft can produce a console near that price.

However, Sony is not hurting for options. Companies will typically lose money selling a game console, expecting to make their profit from selling accessories and games. Sony could employ the same strategy with PS5, while also taking advantage of subscription revenue from its PlayStation Plus and PlayStation Now services. The latter will likely see a huge upgrade in 2020 as a result of Sony's need to compete with Xbox's extremely successful Game Pass subscription service. This strategy has worked well for Sony's PS4, and it was one of the primary reasons the PS4 requires a Plus subscription for online play. Therefore, if Sony can release a cheaper machine than Microsoft, and offer improved services among its feature list, charging more for the PlayStation 5 could still work out in its favor.

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Source: Bloomberg