Is the US market ready to embrace a $500 game console?

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  Fig. 1: Measured purely based on nominal prices, $500 sure seems like it's at the high end. [credit: Ars Technica ]

Last week, a Bloomberg report about PS5 component costs suggested the upcoming system would cost no less than $450 for Sony to manufacture. Add in costs for packaging, shipping, and retail markup, and Sony would likely need to charge about $500 per PS5 just to break even on the hardware at launch (though taking a loss on hardware has also been an option, historically).

The prospect of a $500 PS5 got industry watchers chattering about whether such a price point could be broadly acceptable to the US console-buying market. A look back at console-pricing history suggests that, while a $500 launch would be at the high end of nominal prices, it actually sits right near the middle of the pack when inflation and median buying power are taken into account.

Inflated expectations?

In the history of the game industry, only two game consoles have launched at an MSRP above $500: the $650 Neo Geo in 1991 and the $700 3DO in 1993 (Fig. 1). Both of those consoles sold for way more than the contemporary competition and became instant niche products, as well as cautionary tales for anyone who might decide to price a console too high in the future.

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