Sony CAN'T Kill the PS5

- After six months of talking about the RAM crisis coming, it is officially here. Switch 2, $50 more expensive, PS5 and Series X, $150 more. Now, Valve haven't raised the price of the Steam Deck because it's been out of stock for months. I mean, look, this is not what's supposed to happen. The older a console is, the cheaper it's supposed to be. So where is my dang price drop? The answer is not anytime soon, my friends. The result is that PS5 sales are tanking and this is directly affecting the next generation. When asked how the RAM crisis will affect the PlayStation business, Sony's CFO immediately pivoted to the PS6 with, quote, "We have not yet decided on what timing we will launch the new console or at what prices." Not a, "We don't comment on future hardware." They are publicly telling investors that the chip shortage is causing them to rethink their next generation plans. This points in one big direction for me. The current generation of hardware isn't going anywhere anytime soon. As bad as prices are now, it looks like things are going to get worse before they get better. The reason for all of this is, of course, the RAM crisis. AI data centers are absorbing the world's supply of memory, storage, and quickly CPUs and GPUs as well. This has caused prices to spike and supplies to plummet as the few foundries actually making cutting-edge stuff have pivoted to where the money is: AI, baby. You know what we don't have enough of? Data centers. PlayStations? (scoffs) No one needs PlayStations. Who needs Switches? I just need more data centers in my life. But it's not just the RAM crisis that companies have to deal with. Back in April 2nd of last year, Nintendo famously announced the $450 price of the Switch 2. Now, this was an unpopular decision. Myself and many others expected it to be $400. But the real story was what also happened on April 2nd. The US slapped massive tariffs on, well, basically everything and absolutely the Switch 2 was caught up in it. Now, this really caught Nintendo by surprise. That night, their president at the time told "The Verge" that their $450 price tag was decided on without factoring in potential 40%-plus tarriffs. Now, this caused Nintendo to delay the pre-order date and openly consider whether or not they actually needed to raise the price before they shipped a single console. Now, ultimately, they did opt to stick it out at $450, probably 'cause they had already committed to making millions and millions of Switch 2s, which did enable one of the largest console launches of all time. A year on, it's clear this was a smart move. Within the first couple of months, Switch 2 stock was plentiful basically everywhere, a far cry from earlier Nintendo launches where consoles were hard to find for sometimes years after launch. Well, except the Wii U. No one gave a (beep). - [Alex] Hey! - You know what? Actually, that's not true. The Wii U did sell out, but once it got restocked, it never moved. But with tariffs still not totally out of the picture, Nintendo have run into another problem: the same RAM crisis the entire industry is dealing with. At this point, both Sony and Microsoft have raised pricing by a full $150, and meanwhile, every time someone asks Nintendo about price hikes, up until this point, they basically say, "Nah, we good, fam. Don't worry about it." And then suddenly, with everything else being more expensive, that $450 price tag actually didn't look crazy. However, they have finally given in. Believe me, I am not gonna sit here and tell you that price hikes are a good thing. But something to know about Nintendo is that unlike Sony and Microsoft, they extra traditionally sell console hardware at a small profit. But thanks to all of this, they're supposedly selling the Switch 2 at a pretty significant loss and the investors have been really hammering Nintendo over it. So the fact that they only are raising the price by $50, it's not as bad as it could have been, and they're giving everyone plenty of heads up. The price doesn't hit $500 until September 1st, giving you nearly four months, as opposed to Sony, who gave everyone less than a week before hiking the PS5 price. The other interesting story here is Nintendo's other forecast. They're expecting to sell just 16.5 million Switch 2s the next year compared to analyst estimates before the price hike of over 20 million. So, essentially, Nintendo is telling investors, "Yeah, we're raising the price and, yeah, we are gonna lose customers over it." Now, I kind of get it. I mean, even for a big company like Nintendo, losing a significant amount of money on each console that goes out the door adds up quick, but they kind of don't really have a choice. Xbox at least has the Series S as a semi-budget option. Nintendo, they only have the original nine-year-old Switch, which is absolutely showing its age at this point. Not to mention they're also raising prices on it in some regions for the second time. So what can they do? Well, I think there's an obvious answer. Give us the Switch Lite 2. We demand the Lite life. I want a Switch Lite 2. Give me a Switch Lite 2. The more times I say this, the more I'm going to will it to existence. Look, here's the thing. As I've discussed many times, the Switch Lite, the best version of the Switch. It was the cheapest, it was the smallest, it was the cutest, which is the only thing I care about when I'm buying consoles. The original Switch Lite came out three years after the original. So if Nintendo are gonna follow a similar timeline, we're looking at 2028, and I personally think that's a long time to ask people to pay $500 without a cheaper option. All things being considered, I actually do think Nintendo will ride this one out. I mean, especially if they keep that solid slate of Switch 2 games going, like "Pokopia" and "Donkey Kong." I mean, people who want a Switch 2 are still going to mostly buy one. Now, PlayStation, PlayStation has a backup plan, right? Sort of? Maybe? Oh, they don't. Oh, oh, no. Their recent earnings call was brutal. The PS5 had its worst quarter of all time, down 46% compared to last year. This means that the PS5 is now actually trending behind where the PS4 was at this point in its lifecycle by a full 3.3 million consoles. This is a very different problem for Sony. I mean, sure, the pandemic supply chain caused a lot of issues when the PS5 launched, but as recently as a year ago, the PS5 was trending ahead of the PS4. There is a very clear culprit. The price has been massively hiked. I mean, the PS5 now costs $650, a full $150 more than it did last year, and the PS5 Digital is worse. It is now $200 more expensive than it was when it launched back in 2020. For a console that's taken five years to finally hit its stride, this is a really, really bad look. In their investor brief, they discuss how many PS5s they sell this year are almost entirely being gated by how much memory they can get their hands on at, quote, unquote, "reasonable prices." And it's not just hardware. Sony took a $565 million write-down on Bungie this quarter, essentially admitting that "Marathon" isn't going to save things. Sony's stock is down over 20% since the start of the year and, I mean, there's just not a lot of good news here. Now, it's not a full-on disaster. I mean, the PS5 isn't exactly going anywhere. But the bigger problem really is what comes next. Now, when Sony's CFO talks about "changing business models to come up with the best solution and strategy," he's not just being PR safe, and that's definitely not what he sounds like. Now, I believe Sony when they discussed not knowing when they'll actually release the PS6. I mean, at this point, the PS6's architecture is more or less locked. They've been working with AMD on Project Amethyst for years. Their supplier contracts are signed at this point. I mean, they can't just tear it all up and redesign the console because RAM doubled in price or tripled in price, maybe quadrupled in price. And things are kind of not heading in the right direction either. Most companies are expecting 2027 to be worse for memory than this year, not better. So whether Sony launches the PS6 in late 2027 or they push it to 2028 or even 2029, they might be walking into a more expensive environment than what we're seeing right now. I mean, there's just no good answer here. Delaying doesn't necessarily fix the problem. I think this is why they're talking about new business models out loud. So the rumors point to an upcoming PS6 Lite, which would be Sony's lower price PS6 variant. So based on the leaks, this would be a third member of the PS6 family, alongside the core PS6 as well as the handheld. Basically the PlayStation TV all over again. Ship the portable PS6, but in a smaller form factor with no screen or battery really as a true competitor to the Series S. I think the reason why the Series S did work is that it matched the performance of the pro version of the Xbox One, being the One X, while still costing a lot less and with all the benefits of the current generation CPU, SSD, and graphics. Sure, it targets 1080p, but for a very long time, the Series S was the best deal in gaming. If the PS6 Lite can deliver good PS5-beating performance at a significantly lower price point, great, problem solved, but I have some doubt about how cheap it really will be and how many compromises they'll need to make on the performance side of things. Sure, there are other levers they could play with too. I mean, they could try to ship it without a controller to save some money. They could give you discounts based on subscribing to PlayStation Plus or maybe some kind of all access plan like Xbox used to offer. I mean, being creative on bringing prices down is a good thing. But if anyone from Sony is watching, I have a different pitch. Come out and say it with me: the PS5 shouldn't go anywhere for many, many years to come. Now, not as a, like, we still support your old hardware kind of thing. No, I mean make the PS5 the actual budget tier that sits below the PS6. Keep it up to date with the same software updates, the same games as much as possible. I mean, the same ways that the PC supports everything from "Roblox" to "Pragmata," the PS6 should exist as an upper tier to push things forward, but alongside the PS5, at least until they can actually sell a next-gen console at a reasonable price. Now, Sony has hinted at this in earnings calls, but they keep stopping short of saying it directly. But if you tell people right now that the PS5 that they buy today is going to be a supported current console for the next four, five years plus, even after the PS6 has launched, I think that goes a long way. I mean, sure, $650 is a lot of money for a console, but, like, wouldn't you feel better about knowing that that PS5 you just bought will actually still be relevant for a long (beep) time. That's the specific phrase actually. PS5, relevant for a long (beep) time. And here's the thing, I think Sony should stick with the PS5, but I think Xbox have to. Sony is launching the PS6 from a position of, I would say, relative strength, right? I mean, even after a very rough quarter, they've still got the install base, they've got the games, they've got the brand. The PS6 is going to sell fairly well, no matter if it launches at $600 or $800. But Xbox doesn't have that luxury. Hardware revenue there is down over 30% year over year, the Series X and the Series S has been price hiked twice, and whenever the Xbox Project Helix does launch, all of signs point to it being premium priced. 800 to a thousand dollars there wouldn't surprise me one bit. Which is why if Xbox is smart, they should also commit to the Series S and the Series X being fully supported alongside Project Helix. To me, I think that the current generation of consoles are powerful enough, right? Like, they're not holding gaming back like previous generations. There should be no rush to leave millions of gamers behind when the alternatives are very, very expensive consoles. Now, there's a lot more to talk about on the Xbox side of things, so make sure to subscribe to the channel. We'll be breaking that all down into video soon. But if we step back for a second, Sony are being pushed by the RAM crisis toward potentially kind of compromising what that next generation is actually gonna look like. Xbox are doing what they can to come back. Nintendo, I mean, they're off to a good start with the Switch 2, but they're definitely not immune to any of this.