Sony's PS5 Pro is an expensive test for next-generation consoles

Yesterday's announcement of the PS5 Pro was no surprise. What was surprising was the price: at $699.99, it is Sony's most expensive console ever. It brought back memories of the controversial price of the PS3, a console that, adjusted for inflation, has the same price of $779 as a PS5 Pro with an additional disc drive. It's a very expensive PlayStation, and I fear it's a test of what's to come in terms of next-generation console pricing.

For years, console gamers have been accustomed to buying hardware at a significantly lower price than what they could build themselves in the PC gaming space. Yes, you can find components that are equivalent to the PS5 or Xbox Series X on paper, but it's still difficult to match the prices that consoles sell for, especially when they're discounted during promotions. Plus, the simple plug-and-play model, simplified interface, and straightforward warranty process are huge advantages over building or finding a good pre-built PC and then dealing with Windows and driver updates. Consoles sell in the millions because they're much more consumer-friendly than PCs.

However, it increasingly feels like the gap between console and PC is blurring. Microsoft and Sony have both pushed this current generation towards the kind of CPU, memory and GPU power you'd find in a gaming PC. The PS5 and Xbox Series X/S have far more powerful CPUs for gaming rather than underpowered laptop-like ones, and will improve the performance of your existing games library just like a GPU upgrade would on the PC side. That's why I called the Xbox Series X the next-gen PC when I reviewed it in 2020.

The PS5 Pro illustrates this trend even more clearly. Sony's only selling point is a $700 upgrade for existing and new games to achieve better frame rates while maintaining the same image quality. That's been the selling point for GPUs for decades, and now Sony wants to test whether console gamers are willing to upgrade their hardware in the same way that PC gamers build entirely new machines.

The big difference this time is that Sony is asking you to pay for that upgrade, just as PC gamers have grudgingly adjusted to skyrocketing GPU prices over the past few years. Both Sony and Microsoft typically sell consoles at a loss initially to subsidize the hardware and grow the market for next-gen systems. These initial hardware losses are usually covered by revenue from digital games and in-game purchases.

The PS5 Pro is all about digital sales, meaning it ships without a disc drive. Of course, you can buy one separately ($79.99), but if you don't care, Sony is capitalizing on this digital sales push and the 30 percent discount it gets on most purchases. Microsoft and Sony are both aiming for a disc-free future for consoles, and it seems likely that next-gen systems won't ship with disc drives as standard. Hopefully, though, you'll still be able to buy one separately.

It's also likely that next-generation consoles will be much more expensive than we're used to. Component costs aren't falling, the console market isn't growing, and Microsoft's Xbox boss Phil Spencer admitted earlier this year that subsidising hardware is now difficult because component prices aren't falling fast enough.

Last year, a Microsoft document revealed that the company planned to subsidize the Xbox Series X and S by $1.5 billion in 2021 to meet its price targets of $499 and $299, respectively. “This is our largest hardware subsidy ever” on Microsoft's income statement for its gaming division, the document said. With Xbox Series S/X sales still lagging behind those of the PS5, it's unlikely Microsoft will rely on heavily subsidized Xbox hardware again for its next-gen consoles.

Sony already seems to be at the point where it will no longer heavily subsidize its PlayStation consoles. The lack of a disc drive helps Sony lower console costs on both the PS5 Slim and Pro models. The PS5 Pro's price also seems designed to be profitable from day one, rather than months or years later. It took Sony nearly a year to stop selling the $499 PS5 at a loss, and a year later, the company raised PS5 prices outside the U.S. to cover inflation and component costs. In 2022, PS5 prices rose 10 percent in Europe, 12.5 percent in Japan, and around 6 percent in the U.K. Sony has raised PS5 prices in Japan three times since the console launched in 2020.

Crucially, Sony has never raised the price of the PS5 in the US, the only market where it still faces competition from Xbox. Microsoft admitted last year that it has a 20 percent market share in Europe, compared to Sony's 80 percent. If there is no competition in Europe, Sony can adjust prices by 10 percent or sell a new PS5 Pro for 799.99 euros (about $884).

In the UK, the PS5 Pro is even worse in price. The PS5 originally launched in the UK at £449 and in the US at $499 – a currency gap given the weaker value of the British pound over the past decade. After the price increase to £479 in 2022, the UK will now have to pay £699 for the PS5 Pro, compared to the US launch price of $699. If you want to buy a PS5 Pro and the separate disc drive in the UK, the price is a whopping $1,045. In the US, in many states with sales tax, the same console and disc drive is only $818, so a difference of almost $230.

Sony faces little competition from Xbox console sales in Europe and the UK, and Microsoft's plans for a redesign of the Xbox Series X have been put on hold. It seems it will forego a mid-generation spec upgrade and instead release an all-digital white version of the Xbox Series X and a limited edition 2TB model. Neither of these models offers the improved GPU that the PS5 Pro includes, leaving Sony with a loophole to price the PS5 Pro accordingly worldwide.

While I hope the price of next-gen consoles won't rise to $999, I do think a $699 price tag wouldn't be too surprising when next-gen hardware hits the market. Maybe we'll all have to work more hours to afford one. We're entering new territory for console generations, and the pricing of Sony's PS5 Pro is about to test Sony and Microsoft's decisions for their next-gen hardware choices. Hold on to your drives and wallets, because consoles are about to get expensive.