Playstation 5 [PS5] [Release November 12 2020]

[JPT]

The tariffs for the USA is going up and down every other day. How can you set a price? My guess is that, they are unable to set a price, so it will be a day by day price.

 

[iroboto]

I did some napkin math for any readers not understanding how a tariff in the US would increase prices in Rest of World

Let’s break it down step by step with the help of ChatGPT:
Let’s recalculate everything from scratch, this time assuming a $30 profit per unit sold.

---

Scenario Setup​

• Total units sold globally = 1,000,000 per Month
• US units = 500,000
• Rest of World (RoW: EU + UK + others) = 500,000
• Profit per unit (all markets) = $30 USD

---

Step 1: Baseline Profit per Month (No Tariffs)​

Region	Units Sold	Profit per Unit	Total Profit
US	500,000	$30	$15,000,000
RoW	500,000	$30	$15,000,000

Total Profit = $30,000,000

---

Step 2: Tariff Impact in US​

• MSRP (US) = $399
• Tariff (145%) = $578.55
• New MSRP (US) = $399 + $578.55 = $977.55

Huge price hike → Expect major drop in sales.

Estimate Drop-off in Sales​

Using a conservative assumption that only 10–15% of original US buyers will still purchase:

• Remaining US units sold:
  • 10% → 50,000
  • 15% → 75,000
• US Profit after drop:
  • 50,000 × $30 = $1.5M
  • 75,000 × $30 = $2.25M

---

Step 3: Revised Total Global Profit​

Scenario	US Profit	RoW Profit	Total Profit
Before Tariff	$15M	$15M	$30M
After Tariff (50k US sales)	$1.5M	$15M	$16.5M
After Tariff (75k US sales)	$2.25M	$15M	$17.25M

---

Step 4: Profit Shortfall​

• Low estimate shortfall = $30M – $16.5M = $13.5M
• High estimate shortfall = $30M – $17.25M = $12.75M
• Average shortfall = $13.125M

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Step 5: Required Additional Profit Per RoW Unit​

• RoW units = 500,000
• Required extra per unit = $13.125M ÷ 500,000 = $26.25
• New target profit per unit = $30 + $26.25 = $56.25

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EU Price Recalculation​

Assumptions:​

• Exchange Rate = 1 USD = 0.92 EUR
• VAT = 20%
• Duty = 5%
• Cost to Sony = MSRP – $30 = $369

Target Price in USD:​

New Target Retail Price=369+56.25=$425.25
Convert to EUR:

425.25×0.92=€391.23
Add duty (5%):

€391.23×1.05=€410.79
Add VAT (20%):

€410.79×1.20=∗∗€492.95∗∗
New EU MSRP ≈ €492.95

---

UK Price Recalculation​

Assumptions:​

• Exchange Rate = 1 USD = 0.79 GBP
• VAT = 20%
• Duty = 5%
• Cost to Sony = $369

Target Retail Price:​

369+56.25=$425.25
Convert to GBP:

425.25×0.79=£335.95
Add duty (5%):

£335.95×1.05=£352.75
Add VAT (20%):

£352.75×1.20=∗∗£423.30∗∗
New UK MSRP ≈ £423.30

---

Summary Table​

Region	Current MSRP	New MSRP	Change	% Increase
EU	€449.99	€492.95	€42.96	~9.5%
UK	£359.99	£423.30	£63.31	~17.6%

---

​

 

[Shifty Geezer]

Or, price lower in EU and sell more consoles. $30 per unit is a rather meaningless number as there's far more money to be made from long term digital content and subscriptions. So instead of selling 500k units at a hardware profit (and probably less than that because interest will decrease with a higher price), sell 900k at a lower price with the unwanted US stock and maintain your population growth and all its ongoing monetisation.

 

[iroboto]

Or, price lower in EU and sell more consoles. $30 per unit is a rather meaningless number as there's far more money to be made from long term digital content and subscriptions. So instead of selling 500k units at a hardware profit (and probably less than that because interest will decrease with a higher price), sell 900k at a lower price with the unwanted US stock and maintain your population growth and all its ongoing monetisation.

I just averaged out their annual margin of 7% on 399. Which was close to 30. I mean I didn't even calculate the loss in sales as a result of a price increase. The model was not meant to be accurate, but just to showcase how a tariff in an important market could increase the cost elsewhere. I had to assume there was a profit because if they sold for a loss, then losing those sales may not necessarily hit their bottom line as hard in theory.

I don't think Sony would choose to take a guaranteed loss on a console during a time where there is massive economic turbulence. They could buy the console and play F2P games and never buy a subscription or MTX. And the price drop to double the sales in UK and EU would have to be substantial.

with the loss in sales I can get Chat GPT to recalculate.
Perfect — now let’s recalculate the entire global profit and pricing model using Sony’s average margin of 7% on the $399 MSRP, instead of assuming a flat profit per unit.

We’ll also factor in:

• US tariffs (145%)
• Resulting drop-off in US, EU, and UK buyers due to price hikes
• New required prices in EU and UK to still reach original profit target

---

Step 1: Baseline Profit Model (Using 7% Margin)​

Base MSRP = $399​

Sony’s margin = 7% →

399×0.07=$27.93 profit per unit

---

Baseline (Pre-Tariff) Sales:​

Region	Units	Profit/Unit	Total Profit
US	500,000	$27.93	$13,965,000
EU	250,000	$27.93	$6,982,500
UK	250,000	$27.93	$6,982,500

Total Profit (Target) = $27.93M

---

Step 2: Apply US Tariff (145%)​

• MSRP = $399
• Tariff = $399 × 1.45 = $578.55
• New Price = $399 + $578.55 = $977.55

Likely result: Massive drop in sales.
Assume only 10–15% of buyers remain → Use midpoint: 12.5% of 500k = 62,500 units

New US Sales	Profit/Unit	Total Profit
62,500	$27.93	$1,745,625

---

Step 3: EU & UK Price Hike and Buyer Drop-Off​

From earlier:

• New prices for EU and UK raised from:
  • EU: €449.99 → ~€492.95 (9.5% ↑)
  • UK: £359.99 → ~£423.30 (17.6% ↑)

Estimated buyer drop-off (from elasticity):

• EU: ~12.35% → New units = 250k × (1 – 0.1235) ≈ 219,125
• UK: ~26.4% → New units = 250k × (1 – 0.264) ≈ 183,999

---

Step 4: Recalculate Profit Based on New Sales Volumes​

Region	Units Sold	Profit/Unit	Profit
US	62,500	$27.93	$1,745,625
EU	219,125	$27.93	$6,119,936
UK	183,999	$27.93	$5,139,154

Total Profit = $1.75M + $6.12M + $5.14M = $13.01M​

---

Step 5: Determine Shortfall​

• Target global profit = $27.93M
• New projected profit = $13.01M
• Shortfall = $14.92M

This needs to be recovered from remaining EU + UK buyers:
Total remaining units = 219,125 (EU) + 183,999 (UK) = 403,124

---

Step 6: Required Extra Profit per Unit​

$14.92M÷403,124≈$37.01 extra per unit
So, new required profit per unit = $27.93 + $37.01 = $64.94

---

Step 7: New EU MSRP​

• Cost basis = MSRP – profit = $399 – $27.93 = $371.07
• New price = $371.07 + $64.94 = $436.01

Convert to EUR:

$436.01×0.92=€401.13
Add 5% duty:

€401.13×1.05=€421.18
Add 20% VAT:

€421.18×1.20=∗∗€505.41∗∗
New EU MSRP = €505.41

---

Step 8: New UK MSRP​

• Same USD base: $436.01
  Convert to GBP:

436.01×0.79=£344.45
Add 5% duty:

£344.45×1.05=£361.67
Add 20% VAT:

£361.67×1.20=∗∗£434.01∗∗
New UK MSRP = £434.01

---

Final Summary Table​

Region	Original MSRP	New MSRP	Buyers After Drop	% Price ↑	Final Profit
US	$399	$977.55	62,500	~145%	$1.75M
EU	€449.99	€505.41	219,125	~12.3%	$14.23M (via higher margin)
UK	£359.99	£434.01	183,999	~20.6%	$11.95M (via higher margin)

Total Global Profit = ~$1.75M + $14.23M + $11.95M = $27.93M

---

 

[Karamazov]

they should offer a free copy of Concord to ease the price increase.

 

[iroboto]

lol I like Shifty's idea of reducing the price to increase volume. But I assume there is inherent risk level there that isn't cleared sufficiently that Sony chose to sell less and get more profit per unit, than to have to commit to selling a whole whack more and if there isn't enough revenue you'd go under with all this additional hardware sitting around.

It's just not something I can model.

But unsurprisingly, if you decide to increase prices, your expenses are technically still under control. If you commit to losing a lot per console, your expenses are no longer in control, and you are absolutely gambling that the revenue will be there to bail you. And I don't think that's a valid strategy when the entire world will be under contraction for a while as a result of these changes.

 

[wco81]

I heard the tariff isn't imposed on the retail price of the product but the wholesale or cost to the importer.

Of course with consoles, that may not be a lot less than the retail price.

 

[iroboto]

I heard the tariff isn't imposed on the retail price of the product but the wholesale or cost to the importer.

Of course with consoles, that may not be a lot less than the retail price.

That's right. Tariffs are paid at the importer. So any tariffs would be applied there at a lower price point. Retailers would pay a marked up price + transportation. It definitely won't be 145% to the customer. Maybe closer to 120%. But the tariff amount is so massive, it's just going to jack the price through the roof.

 

[Charlietus]

Many companies are probably hoping that someone announces big increases in price before they do. The first that does it will probably open the floodgates.

 

[iroboto]

I think the main move was for them to stockpile consoles as much as possible and leave them in the US. Then any newly manufactured consoles are sent to rest of world, and hopefully they have enough stock to whether this and reverse course on tariffs.

 

[Shifty Geezer]

That's right. Tariffs are paid at the importer. So any tariffs would be applied there at a lower price point. Retailers would pay a marked up price + transportation.

Or rather, the costs can be spread around anyone involved. Although charged at import, if a distributor feels the retail price will be too high, they might refuse to buy the product in at the supplier's asking price, at which point the supplier might feel it prudent to drop the price and make less money to ease the distributors concerns. Likewise, the distributor might pass that on to the retailer, or the retailer may fear they won't shift units and won't buy, at which point the distributor might take on the burden. Or it might be negotiated across all three, so the hit is shared.

But personally I think 145% (or whatever it is; a new tariff or bucket may have been announced...) is flatly unworkable and that's kinda the point. The tariff is in essence intended to make certain trade 'illegal' priced so high it cannot work, with a view to either getting something else to happen, or get agreements worked.

In short, I don't think anyone is genuinely planning around 145%, or 60%, or anything else. The whole situation needs to settle into percentages that can be trusted to stay in place for the long term. I guess the main problem is boatloads that already left for the US only to arrive and be told to pay silly money to unload. Barring that, it'd likely be best to just not provide stock to the US and let it run out until tariffs are sorted.

 

[Shifty Geezer]

I think the main move was for them to stockpile consoles as much as possible and leave them in the US. Then any newly manufactured consoles are sent to rest of world, and hopefully they have enough stock to whether this and reverse course on tariffs.

Well. precisely. At which point adjusting the EU price to accommodate US tariffs when those tariffs aren't affecting the supplier seems premature, particularly when you are hoping rather reasonably that ultra tariffs won't remain in place for months/years. Extra income now from EU won't be offsetting US losses.

 

[Charlietus]

Would it be possible for a product that's made in china to be sent to the EU, and then another company sends it to the US therefore bypassing the 145% tariffs and just paying the 10% tariff from the EU?

 

[Shifty Geezer]

There's been discussion on that, notably exporting from China to Vietnam or wherever as a stop-gap. Ultimately it'd be tax wrangling via loopholes that'd be closed, and never a long-term viable trade solution.

Edit: Technically there could be a roaring trade of Europeans selling EU stock to Americans on eBay, and grey market imports. In the case of ~150% tariffs, and >$1000 consoles, a legitimate private purchase in the EU could be sold to the US with a couple hundred dollar markup and still be a huge bargain! There'd also be smuggling up the wazoo potentially, shipping goods from Europe to the US to avoid tariffs. It's just unworkable. The whole situation of such extraordinary tariffs could never become a feasible trade structure.

 

[JPT]

Or, price lower in EU and sell more consoles.

The EU will put up tariffs to avoid products being shifted from the USA and dumped into the EU market. If it will cover electronics from Japan to, who knows, but that is usually the merry go round according to what I read.

Would it be possible for a product that's made in china to be sent to the EU, and then another company sends it to the US therefore bypassing the 145% tariffs and just paying the 10% tariff from the EU?

This why USA i tariffing Canada and other countries, because allegedly China is doing this through Canada etc.

There's been discussion on that, notably exporting from China to Vietnam or wherever as a stop-gap. Ultimately it'd be tax wrangling via loopholes that'd be closed, and never a long-term viable trade solution.

Edit: Technically there could be a roaring trade of Europeans selling EU stock to Americans on eBay, and grey market imports. In the case of ~150% tariffs, and >$1000 consoles, a legitimate private purchase in the EU could be sold to the US with a couple hundred dollar markup and still be a huge bargain! There'd also be smuggling up the wazoo potentially, shipping goods from Europe to the US to avoid tariffs. It's just unworkable. The whole situation of such extraordinary tariffs could never become a feasible trade structure.

I think it probably wouldn't work, tariff is collected when it enters the country, I assume the local customs collects it before releasing it to the recipient or at least issuing an invoice.

//Edit

I wonder if the toll free zones would work, we used to have them at my old place of work. It basically was a designated area of the warehouse we stored goods in. We did not have to pay import tax on goods in there until we moved it on from the zone into the "real" part of the warehouse. So if you store it there and just pull out stock on the days when the tariffs are low it could save you a coin.
I doubt that it would work, I was never involved with it except for ordering stuff that would taken out from that area and sent on to customers abroad.

 

[wco81]

There's been discussion on that, notably exporting from China to Vietnam or wherever as a stop-gap. Ultimately it'd be tax wrangling via loopholes that'd be closed, and never a long-term viable trade solution.

Edit: Technically there could be a roaring trade of Europeans selling EU stock to Americans on eBay, and grey market imports. In the case of ~150% tariffs, and >$1000 consoles, a legitimate private purchase in the EU could be sold to the US with a couple hundred dollar markup and still be a huge bargain! There'd also be smuggling up the wazoo potentially, shipping goods from Europe to the US to avoid tariffs. It's just unworkable. The whole situation of such extraordinary tariffs could never become a feasible trade structure.

If an American imports something, that may be subject to customs.

Even ordering something from Amazon Canada, it may get held up by Customs.

Now if it's sold through eBay and labeled as a used product, not sure if the same customs fees would apply.

Obviously if the practice becomes widespread, they're going to try to hold those up.

In fact, people have ordered DJI drones directly from DJI and many of those have sat in Customs, including reports of DJI canceling them and encouraging customers to place the order again.

 

[Roly]

The EU will put up tariffs to avoid products being shifted from the USA and dumped into the EU market. If it will cover electronics from Japan to, who knows, but that is usually the merry go round according to what I read.

I don't follow why the EU would tariff gaming consoles to prevent dumping - they punish their consumers (and electorates) when there is no appreciable (to my knowledge) endogenous supplier of consoles? I understand it for say, automotive, machine tools, and some intermediate inputs - where you are protecting industries from products being dumped because the original target market now has a tariff wall. That does not seem to be the case with respect to EU and gaming consoles.

It would be a high tariff wall indeed that protected the GX4000.

 

[Roly]

I wonder if the toll free zones would work, we used to have them at my old place of work. It basically was a designated area of the warehouse we stored goods in. We did not have to pay import tax on goods in there until we moved it on from the zone into the "real" part of the warehouse. So if you store it there and just pull out stock on the days when the tariffs are low it could save you a coin.
I doubt that it would work, I was never involved with it except for ordering stuff that would taken out from that area and sent on to customers abroad.

I think there is capacity to do this many of the world's major ports - but for the rates and volumes involved, and the volatility, the administrative overhead seems like it would be very high.

 

[JPT]

I don't follow why the EU would tariff gaming consoles to prevent dumping - they punish their consumers (and electorates) when there is no appreciable (to my knowledge) endogenous supplier of consoles? I understand it for say, automotive, machine tools, and some intermediate inputs - where you are protecting industries from products being dumped because the original target market now has a tariff wall. That does not seem to be the case with respect to EU and gaming consoles.

It would be a high tariff wall indeed that protected the GX4000.

I was speaking in general terms to protect against dumping and it could include electronic goods and consoles. But who knows what they are doing just yet.

 

[iroboto]

I received the email from Sony on price increases for PS Plus, was too lazy to post it here but the resetera thread covers it well.

PS Plus Price Increase in Canada

Welp, I just got the email from Sony. Starting now, the price for Extra will increase by another $30CAD. "We want to let you know about an upcoming price change to your PlayStation®Plus subscription. The price for your current PlayStation Plus Extra 12 month subscription will be increased to...

www.resetera.com

Premium Sub is now about the same price as GPUltimate.