Yen weakness forces unprecedented PlayStation price rise

Sony has raised the price of its PlayStation 5 console in Europe, the UK, Japan, China and other key markets by as much as 10 per cent, as surging inflation and the plunging yen force the company to break with years of marketing strategy.

While the price of a PS5 in the core US market will remain the same, the increases for the flagship disc-edition PS5 model range from between 6 to 10 per cent.

In a blog post announcing the increases, Jim Ryan, head of Sony Interactive Entertainment, described the move as “a necessity, given the current global economic environment”.

At a similar stage of previous console cycles, a price cut would have been the most likely marketing move by Sony, as it prepared for Christmas sales, a prolonged battle with rival consoles, and the start of the machine’s third year on the shelves.

In addition to rising global costs and a semiconductor shortage that has held production levels far below demand, the PS5 has been a victim of currency volatility. The PS5 was launched in November 2020 when the yen traded at around Y105 against the US dollar. Since June this year, the currency has been below Y130 to the dollar, dramatically increasing the PS5’s production cost in yen terms.

“The unprecedented increase is driven really by forex, given costs are in US dollars. It’s how they hit their forecasts this year and if they can hit the volumes they say, then it will have upside,” said David Gibson, an analyst at MST Financial Services. However, the price increase “doesn’t make it easier for consumers to get one”, he added.

When asked about the likelihood of a PS5 price increase at its most recent results announcement on July 29, Sony’s chief financial officer replied that “nothing concrete can be said at this point in time”. He said component supplies and logistics still created major constraints on distribution, despite recent improvements in the parts supply chain.

The hikes are the first post-launch price increase since Sony launched the original PlayStation in 1993, and deepen the company’s battle to maintain global console market dominance over Microsoft’s Xbox Series X machine. Since its launch, Sony said it had shipped 21.7mn units as of June this year. Independent analysis shows that the Xbox Series X sold around 15mn units over the same period.

The price increases come as Sony continues to struggle with production of its flagship games machine, which was launched during the depths of the pandemic and has suffered from the broader global supply shortages in semiconductors and other components.

In Sony’s home market of Japan, machines have been in such short supply that units currently sell in the second-hand market at a premium of about 70 per cent over the official (pre-hike) retail price. In May, Sony sold just 2,693 PS5 units in Japan — a number which reflected the exceptionally tight supply.

In June, long-term Sony analyst Pelham Smithers calculated that rising material costs, high energy prices and the yen’s descent to a 20-year low could have meant that Sony was losing as much as Y15,000 on each PS5 unit it sold in Japan. Globally, the average loss per machine was likely to be around $50, Smithers said at the time.