The PS5 Price Hike is Just The Start...

- It is official. The PS5 is getting another price hike. Starting today, Sony is charging at least $100 more for the PlayStation 5. The PS5 with a disc drive now costs $650. The PS5 Pro, which I'll remind you, launched at $700 just a little over a year ago, is now $900. And the PS5 Digital Edition, you know the one that was supposed to be the affordable way to get into PlayStation, that launched at $400 back in 2020, but today, costs $600. That is a 50% increase on a five-and-a-half-year-old console. This story is a little too familiar. Microsoft raised Xbox prices twice last year. Nintendo raised the price on the original Switch after the Switch 2 was already on sale. And let's face it, now that the RAM crisis is in full swing, the Switch 2 will almost certainly see a price hike soon. Not even games are immune. Game Pass is legitimately twice as much as it used to be. And while games sat at $60 for basically 20 years, even now, these are starting to creep up to 70 and 80 bucks. All of this, it's just not normal. In every previous console generation, prices went down over time, early adopters paid full price, and everyone else waited a couple years to buy the slim console at a discount. I mean, the PS1 launched at $300 and ended up dropping to $100. The PS3 launched at $600 and ended up at $200. I mean, it has been like this for decades. But this is the first generation where every single platform went up instead of down, all of them at the same time, and I have the data to prove it. May I present to you a Keynote presentation on this subject and no, I'm not joking. Look at these numbers. I'm not kidding. - [Ken] This will be the first time I've ever seen you make a PowerPoint. - I wanted to... Look, there's a lot of dense information here I want you to see. So if we take Xboxes, for example. Adjusted for inflation, the original Xbox was $527. However, by the end of the lifecycle, it was about half the price, $247. Xbox 360, same thing. It was $636 to launch, $288 by the time they brought out the lower end models. And you see, even with the Xbox One and to a small degree with the Xbox Series S. However, that one's a little bit misleading because the Series S launched at $300 right out of the gate. That is the cheapest Xbox they ever made, at least for this generation. However, if we move over to the PlayStation side of things, it looks a little bit more complicated. PlayStations have generally been pretty expensive at launch, but they get a lot more for affordable over time. So again, this is all adjusted for inflation. You can see the PS1 was basically a third of the price by the end, same thing with the PS2. PS3 is an especially big jump. And while the PS4 didn't see quite the kind of price drop, it did eventually see a price drop. However, you look at the PS5, again, adjust for inflation, the cheapest PS5 you could ever buy was in 2020. It has gotten more expensive over time, $600, $650, $900 buying it today. Moving over to Nintendo, you'll see a similar story. Ignoring the NES, which is really expensive at launch, pretty much without fail, Nintendo consoles have launched for between $350 and $450 after inflation, and after a little while, they get dramatically cheaper except for the Wii U, but no one bought a Wii U, so it doesn't count. And when you get to the Switch 2, which people are buying, but I highly doubt we're seeing a cheaper Switch 2 anytime soon. This line is gonna start coming this way real quick. Put all this together, and a very clear picture is forming. Gaming is getting a whole lot more expensive. So according to Circana, which is one of the bigger firms that track consumer spending in gaming, they published recently something which really tells the story. In early 2022, 40% of US gaming hardware buyers had household incomes over $100,000. By the end of 2025, that number was up to 53%. And the average price someone pays for a new piece of gaming hardware went from $247 in 2019 to $452 last year. And again, that's before a lot of these price increases really took over. Gaming is becoming a luxury hobby, and the question I keep coming back to is, does it have to be this way? Back in the day, my parents used to enjoy going to Las Vegas. Now, they weren't high rollers, but it was an easy weekend trip. Back then, Vegas was built for almost everyone. Rooms and buffets were dirt cheap. There were shows, entertainment everywhere. I mean, casinos would basically give stuff away because they made their real money on slot machines, on tables, the gambling. The whole city was designed around one idea, get people through the door as cheaply as possible, then make money with the odds quite literally stacked against them. This is pretty much how consoles have worked for 30 years. Sell the hardware at breakeven, or even a loss, because every console you sell is a customer who's gonna buy games, subscribe to online services, and purchase add-ons for your platform for years and years to come. The $300 PlayStation was the cheap hotel room, and the games were the casino floor. It didn't matter if Sony or Microsoft lost money on every box because the real money was always in software. But at some point, Vegas changed. The hotels figured out that they didn't need to give away cheap rooms and buffets anymore. Gambling revenue was still strong and they could charge full price for everything else. It's almost like when an industry realizes that they can get away with charging more, they just kinda keep charging more. Funny how that works, huh? I think gaming might be at that exact same turning point right now. And to understand why, we need to talk about what's really driving these prices up, because it's not as simple as, "Greedy companies are just taking advantage of the RAM crisis." You know, that's definitely part of it. This is only half of the story. Gaming is getting crushed from two directions at once. If you've seen any of our videos over the last few months, you know that the RAM crisis has been the story in the tech space. The short version is this. AI data centers are absorbing the world supply of memory at an absolutely unprecedented rate. And the only three companies who make basically all the RAM have focused on where the money is at. The result is a massive shortage of components for PCs, phones, and especially consoles. And this is off the back of a year where companies had to deal with serious uncertainty around tariffs. I think a lot of people don't realize that while most PCs and phones actually don't have heavy tariffs at this point, consoles are absolutely slapped with them. The price hikes we saw last year were mostly due to those tariffs. Now we're seeing the results of the RAM crisis causing the whole situation to get even worse. But it's not just consumers who can't afford gaming. Even giant studios are running into issues. On the high end, AAA games are truly, absurdly expensive to make. It's not just about taking five or six years to make a game. We're talking two or $300 million to make a single AAA title. When it hits, great. When it doesn't, you're all fired, literally. We've seen massive layoffs across the industry year after year because of this. The stakes are so high, the publishers kind of can't afford to take risks anymore. It's basically sequel after sequel, which are deemed "safe". This means we get fewer games that take longer to release, and oftentimes, have higher prices or tons of extra day one edition nonsense to try to make the math work. This has taken a big toll on the gaming industry. Developers are rightfully worried and upset that they're a small step away from losing their jobs or being replaced by AI. And somehow, things are even worse on the other side. For years, mobile is where a huge chunk of the money in gaming actually is. And as someone who recently tried the top 100 free games in the App Store, look, calling most of these games is generous. It is a free to play ad supported hellscape out there. So if you're priced out of a $650 PlayStation, here's your alternative. Have fun. I'm kidding. - Just hear me out. No one's having fun with whatever the (quack) this is. So to recap, we've got gaming hardware being priced out of reach for tons of people. You've got the traditional AAA games being squeezed for every dollar under threat of frigging bankruptcy to try to keep up. You've got the mobile space full of AI slop, and the simple fact is gaming as a hobby is becoming less and less popular. Matthew Ball's latest report has data from three separate research firms, and they all showed the same thing. The share of Americans who play games spiked during the pandemic. I mean, no surprise there, but it hasn't just come down to where it was before. It is actually now dropped below pre pandemic levels in a country of almost 350 million people, that is a ton of folks who just simply have stopped gaming. And you've gotta imagine that people are instead reaching for TikTok, or youtube.com/austinevans, or Netflix. I mean, gaming has to compete with all of that while also getting more expensive. And I'll tell you what's not getting more expensive, subscribing to the Austin Evans channel, still free 99 while supplies last. So I've had conversations with people at major PC manufacturers who estimate that laptop pricing alone could rise by roughly 30% by the end of this year and stay elevated through 2027. This is not just a gaming problem. The entire industry is dealing with the RAM crisis, with tariffs, with the other world events causing havoc right now. So if we just accept this, is the answer really to just get mad at Sony and Microsoft for raising prices? I mean, based on the comments, it is a bunch of greedy companies just trying to screw us all over. And while I do agree with that to a degree, I actually think the answer's a little bit more complicated. Alright, so lemme put on my Sony Pony hat for a second to play Devil's Advocate. If I'm Sony, the argument I would make is that it's not their first choice to raise hardware prices. There is some logic here. Sony doesn't make real money by selling you a PS5. They make that money when you buy games, when you subscribe to PlayStation Plus, really, when you entrench yourself in the PlayStation ecosystem. Every single person who gets priced out of PS5 is a customer they potentially lose for the entire generation. That's five, six, or even seven years of software revenue just gone. Poof. All bye-bye now. And I think Xbox has learned this the hard way. After raising prices twice last year, their hardware revenue dropped over 30%. That is a lot of potential customers walking away. Now, supposedly, Sony has been profitable on PS5 console hardware for the last couple of years. Something our teardowns of the various revisions of the consoles would definitely back up. But they've traditionally been pretty okay with eating a loss on the hardware to get you on board. So why are we looking at a 50% price hike on a five-year-old console, even when you do account for the RAM crisis? If I firmly grasped the Sony Pony hat around my head, I would say that they, of course, don't have a choice here, right? I think we could make a reasonable assumption that the amount of RAM they're able to get might be only 50 or 60% for this year compared to last year. If this is true, you really have two options. Raise the price to bring demand down to match your supply, or you keep the prices the same, and we're right back to 2020. Well, not that part of 2020. You remember, like, the bots, the scalpers, the empty shelves that weren't toilet paper, and all the people who are paying $800 on eBay for a console that was supposed to cost $500. - [Ken] And Austin's mustache. - And my mustache was... No, my mustache was 2019. Oh, but thank you for remembering. - [Ken] It's all the same to me, man. - The other day on This Is, Matt said- - Even the people who bought from scalpers are now have an appreciated- - Oh my God, are you trying to say that was a good idea in 2020 to pay a scalper $700 for a PS5? - Somehow. - Now that sounds wild, but it's kind of not wrong. And don't forget Valve. The Steam Deck OLED has been sold out for a couple of months now because the supply and demand is way outta proportion. That is to say the supply is zero. But Valve here have chosen not to raise the price, which sure is absolutely admirable, but the result is the same for you and I. You can't buy one. And when they do restock, I will guarantee you scalpers are going to have a field day. So honestly, all this Sony Pony nonsense aside, I do think that $650 or $900 for PS5 is kind of ridiculous. But I also do think that at least some of this is really driven by supply constraints. No one can get their hands on enough RAM right now, Sony, or anyone else. And if it just so happens that the smart move is to crank up your price for something that's quote unquote out of your hands, I don't think they're gonna be losing any sleep over it. That is actually what worries me, not the price hikes themselves, but what happens after. So if I stop playing Devil's Advocate for Sony here, the RAM crisis will end, eventually. Maybe it's new tech. I mean, Google just released an AI compression algorithm called Pied Piper. I mean, sorry, what was it? Turbo Quant? It was... (laughing) Come up with better names you frigging AI nerds. This actually does cut AI memory requirements by as much as six times, and it's already taken a big bite out of the stock prices of big RAM companies. But it might just mean that more people use AI because it's cheaper to run and doesn't solve any of our problems. So you know, there's that. New factories will come online. Maybe the AI bubble pops entirely. One way or another, the supply will eventually catch up. But here's the big question. When costs come down for Sony and Microsoft and Nintendo, do prices come back down for us? I mean, inflation has been a thing forever, but deflation? Yeah, that usually is not quite so simple. And this is where the Vegas thing really comes full circle. There's a version of this story where the RAM crisis ends, memory prices normalize, manufacturing costs drop, and slowly brings back the PS5 to four or 500 bucks just in time for the PlayStation 6. Everyone will breathe a happy sigh of relief and we'll go and kiss some puppies and high five some rainbows. It's hard to do. They're pretty see-through actually. Just like... (whoosh) But there's another timeline here. We'll call it the Biff timeline. This is the one where Sony looks at the numbers and realizes, wait, people are buying plenty of $600 PlayStations. Maybe they're selling a few less consoles, but hello, anybody home? Think McFly. Why would you give up that sweet, sweet profit? We gotta build Biff Enterprises, and steal from whatever the thing was at the city hall when you realize your hoverboard doesn't work over water. This is a really tortured analogy, but Biff Land is the timeline we are unfortunately living in right now, I think. Wait, (quack)? He had the hair. (quack), he had the hair. Biff Towers. - [Ken] Oh, (quack). - (beep), they were totally right. (beep) (tires screeching) The thing that used to keep prices in check was competition. The reason the PS4 was $399 is because Sony got absolutely burned by the $600 PS3. They launched it way too expensive, the Xbox 360 dominated, and Sony spent the entire generation playing catch up. They learned their lesson the hard way. Price yourself out of the market and people will go somewhere else. But right now, where is somewhere else? Xbox is pivoting away from traditionally priced consoles most likely, Nintendo has always been in their own lane, and Sony has effectively won the console war. Now, Valve might have a real competitor with the Steam Machine, but first of all, they can't even get enough RAM to launch it, much less compete with the tens of millions of PS5s out there. There is nobody standing on the stage of E3 saying, "Our console does the same thing for a hundred dollars less." That pressure's just gone, much like E3. And just like Vegas figured out that people would pay $80 for a buffet and also plenty of money gambling, I think there's a very real chance that gaming has crossed a line that it doesn't fully come back from. Now, I wanna be clear, there are still tons of amazing games coming out every year if you've already got the hardware to play them. The era of gaming being something that almost anyone could afford, though, that's what's in real trouble. The RAM crisis will pass. The tariffs could change, but I'm not so sure that prices will ever return to the way they used to be. The optimist in me, really hopes so. But the realist in me thinks it's all downhill from here. Now, if you, too, wanna ride the sad sack train with me to Gaming Town, make sure to subscribe to the channel and ring-a-ling that ding-a-ling button. If you want the full deep dive on the RAM crisis and how it's wrecked the Steam Machine, you can check that out here. And Matt and I also got heated about the news about the PS5 price hike on This Is. I'm gonna go play some Game Boy, I think. That seems like the only safe space at this point, which is before the Biff timeline, just so you know.