Sell-through expectations for the PlayStation 5 in 2023?

[VideoGameAccountant]

ConservagameR said:

VideoGameAccountant said:

To your first point, its indicative that the fed is reactionary (as you point out, the Fed likes to wait). The real reason, I'd argue, the Fed didn't want to raise rates was because it would hurt the stock market. The Fed was trying to raise rates earlier, but a 25 basis point increase would result in huge sell offs. If the Fed likes to wait, then they aren't going to stop raising rates until its too late. This isn't good if you are hoping there will be a soft landing.

I don't see the Slim helping much. Since everything has been cross gen, there is little reason to buy a PS5. Everyone is going to cut there spending, so they aren't going to be rushing out to get new consoles. Even if the Slim is $349, its still too expensive. Right now, we are seeing massive credit card debt. This indicates people are using credit to make ends meet, as prices are just too high (and economist like to ignore food inflation, opps). ZeroHedge sums it up well

The combination of record high credit card debt and record high credit card interest is nothing short of catastrophic for both the US economy, and the strapped consumer who has no choice but to keep buying on credit while hoping next month's bill will somehow not come. Unfortunately, it will and at some point in the very near future, this will also translate into massive loan losses for US consumer banks; that's when Powell will finally panic.

The article also notes that credit card debt is some of the highest its ever been. People aren't going to rush out and buy a new console, especially when a lot of the games are already on the PS4 and PC. I don't think cross gen games are over as you say. If anything, they will get more prevalent. Games are a 3-5 year process, so any game that comes out at the end of this year could have started between 2018-2021, which were far better markets for games. With high cost and low demand, expect everything to come out on PS4, if not the PC. This is bad for the PS5 as has little in the way of exclusives and third parties are going to be far more gun shy about committing to next gen.

The reason I think Microsoft is in a better spot than Sony is because Microsoft is focused more on Game Pass than their console. If you don't buy a console, that's fine by them as long as you are getting their games somewhere else. Microsoft can also easily release a budget game pass which is $30 a month and focuses on smaller titles. Sony only has the ability to sell consoles, so they are in a worse spot. And since we're talking about the other guys, Nintendo has a large install bases with Switch and could just weather the storm by delaying their next system. It also gives them time to make more games and have a bigger launch when things recover. All three will be in trouble since I don't think we'll see an economy like 2017-2018 for a long while. We're looking at a worse version of the 1970s here. But I'm more bearish on Sony since they going into the recession with fewer safety nets as oppose to Microsoft and Nintendo.

Waiting a while and waiting too long are not the same. Just like reacting too little, enough, or an overcorrection are not the same. The fed still seems relatively calm and collected for being on the verge of a crash. Not like they'd be freaking out as not to cause a panic, but they haven't made any overly concerning moves just yet. Indicators, but that's about it. If they eventually do, then it's time to start worrying.

Some of this credit card debt is because people didn't cut back during covid like it was thought they would and should've, and they're still waiting for the job market to pick back up. While this is a potential indicator of what's to come, it also backs up my point that people won't just sit around and do nothing. They'll spend any money any way they can even if it's borrowed and worry about the outcome later. Why would anybody assume they won't just bail out the banks again this time around if there's another crash? Who's to say they wouldn't?

While only whispers right now, why would Sony be talking about a PS6 behind the scenes at all if they see a crash coming? Unless they are mistaken, or assume a crash would somehow be solved very quickly, which even a bail out won't do that. A quick bail out, or a slow drawn out recession would still allow a $349-$399 PS5 to continue selling decent numbers, but will almost certainly mean an extended generation, which should then require a Pro model, not a jump to a new gen. Same with the XB Series S whispers about a slight upgrade and keeping the price at $299. That makes no sense on MS part if they see a crash coming, so they would be wrong as well.

Sony has enough games coming out along with third party for PS5. While third parties typically lag behind when it comes to going fully next (present) gen, Sony would've changed their minds by now and would certainly be letting gamers know that future titles will remain cross gen. Yet they haven't indicated that to be the case. Focusing almost entirely on PS5 tells me Sony is pretty confident we're not getting a crash, that it'll be a slow mild recession if anything.

Most casuals don't do PC gaming, it's why consoles exist and sell in the hundred of millions. Plenty of casuals still aren't PC literate or just won't deal with the hassle, and those that would typically have weak PC's, sometimes too weak to play many games. Even then, PS Plus is on PC along with Game Pass, and Plus is cheaper.

Then there's MS having XB purchase AB for $70 billion. If they saw a crash coming, why not wait to buy AB afterwards when the gaming market is tanking and AB is worth much less? Even if MS didn't know then but is worried now, why not back out now with everything standing in their way anyway? Even if they'd have to pay a penalty of a few billion, it would be worth it vs the upcoming losses due to a huge crash. If they still wanted to buy AB after the crash, they could get them for far far cheaper.

PS, XB, and Nin have all been raising prices, so unless they're all wrong, or simply cashing in before the crash, their moves don't indicate hard times ahead. Maybe less than ideal times, but they aren't signaling anything too worrisome.

I think your point is a bit over optimistic. I wouldn't say the Fed is staying calm. It's more so the Fed is trying to correct the mess that they and Washington made. The reason I would be bearish overall is because there is no easy solution. Cut rates and we get hyperinflation, raise them and we get a recession. The Fed wants a recession because it knows that's the only way it can get back to its inflation target.

On credit cards, it's 100% because people are being stretched too thin. Its not just debt that is increasing, but delinquencies, meaning people are past due on their payments. Usually, delinquencies increasing is bad new for the economy, as it hurt the lenders and limits their ability to lend. There are other indicators that we're heading for a hard recession. The yield curve is already inverted and will likely get worse. Car loans are going into delinquency. And of course, you have funny stories like this of people canceling golf memberships.

I don't think you can peg whether or not a recession is happening solely on what these companies are doing. Remember, everyone and their mothers swore up and down inflation was transient and look where that got us. Hindsight is 20/20, and sometimes these companies make moves that were dumb at the time but would have been fine 2-3 years ago. We can certainly put Sony and Microsoft in that bucket as they launched their systems into a supply shortage (which is making the scalping problem worse). Its better to look at economic trends. It may seem like there wont be a recession based on what these companies are doing, but the yield curve doesn't lie. Even still, we can't ignore all the layoffs going on it tech too. 

Now, I think that's enough economic talk, so we can come back in a few months and see which one of us was right. I also see some Sony fans are upset that I insist to talk about macro trends. So I'll leave it with this: I think the 12-13 million predictions are about right, as I said earlier. It could be less depending on the scalper problem (this is one thing most people, analyst included, don't want to talk about because it means people are buying and not playing the console, and these consoles could come back in the market and hurt sales later). There should be less scalped consoles in the wild relative to the total number of PS5s. Still, if these people get behind on their credit card, car, house, they may sell them for a discount which would be very bad for Sony. 

I think when we'll find out is the summer. It takes a few months for someone to get 90 days+ and for collections to come, so we're still a few months out. I'm sure Sony will do fine in the beginning of the year and then hurt towards the back half. If the recession is bad enough, then I could see the sales trajectory be the same as the Wii's (raise up to year 2-3, then decline thereafter). But time will tell. Until then, try not to get too much debt and be flexible with your budget. Also keep some savings as layoffs are coming.