With a nearly unprecedented demand for their current generation of consoles, Sony had the ability to set the price fairly high for the PlayStation 5. Instead, the entertainment giant opted to sell its new consoles at a loss.
The counterintuitive plan was revealed to investors today in a quarterly report. The "strategic price point" of the PS5 was a way to undercut the Xbox console releasing around the same time. Sony's gamble paid off, as the company more than made up for the loss leader with gaming sales and other entertainment revenue. In fact, the gaming division alone boasted a 50% increase in income compared with this time last year. Sony expected to make up the loss on gaming sales and other streams and that did come to fruition. The same report boasted a record $10 billion profit for the company.
There were other signs ahead of the report that Sony could have set its prices a bit higher. Bloomberg noted the price of Sony's components being more than its projected price for lower-tier consoles all the way back in February.
Nevertheless, the company shipped over 4.5 million consoles at a loss between its fall launch and the end of the year. The overwhelming demand for the consoles actually wiped out the first run of PS5s faster than they could be manufactured.
“Everything is sold. Absolutely everything is sold,” Sony CEO Jim Ryan told the Russian news agency TASS. “I’ve spent much of the last year trying to be sure that we can generate enough demand for the product. And now in terms of my executive bandwidth, I’m spending a lot more time on trying to increase supply to meet that demand.”