Pachter has a point: Sony blew it with the PS5 digital edition

[DonFerrari]

RolStoppable said:

Here are Pachter's statements:

“I think Sony really blew it with that, because as far as we can tell, the cost of making a PlayStation 5 is $450, so they are breaking even on the $500 version, but losing $40 or so on the digital version,” he said. “A disc drive isn’t worth that much. So they’re losing $40, but they gain $6 more per digital game than they would gain otherwise. So you would have to buy a lot of games to cover up the loss, and I just think it’s unlikely many will buy that many games.”

Already a wonky analysis because he leaves out first party game sales, which earn notably more revenue per game for Sony, and ongoing PS+ subscriptions. Covering up the losses that an early PS5 adopter brings initially, that shouldn't be a problem in the long run.

“I actually don’t think many consumers will want to save the money, I think most would rather have the disc drive on hand so they have the option to take their game to their friend’s house or trade it in or whatever,” Pachter said. “So I think they blew it with the Digital Edition, but it’s hard to tell early numbers, because it’s all sold out anyway, and we don’t know how many of each they made. But I think over the long run, they’ll sell and make fewer digital editions.”

The closest Pachter comes to a sound analysis is with his last sentence, but even there he puts the cart before the horse. What we've learned from the 20GB PS3 is that Sony will limit the production of their lower-priced SKU because they are taking a notably bigger loss on it; the point of having a cheaper SKU is to advertise in a more favorable way ("PS5, starting at $399."). That's why Sony will make and sell fewer digital editions, not the other way around ("sell and make").

Exactly and we can complement this with all Playstations so far have been launch with a loss leading strategy going from about 50 for PS4 up to almost 300 on PS3 so they breaking even on PS5 with disc and taking 50 or less loss on PS5 DE is actually a first for them. And that is cost on launch, it will get down and possibly will be fast, driver won't drop as fast as the rest so I see no issue for Sony. The only thing that I have seem at most is people complaining that the PS5 with disc is much more expensive and that the driver doesn't cost 100 (so they are basically inverting everything and ignore the cost to make, but that is expected since customers don't really look at that, they only see the price and what they get, with time though that should pass as well).