The era of console price reductions appears to be over as the explosive demand for semiconductors and memory to power AI data centres drives up costs for manufacturers and consumers alike. In March, Sony raised the PS5 price by £90, and Microsoft announced increases of at least £75 for Xbox Series S and X from August, all originally released in 2020. The Switch 2 will also see a global price hike from September.
AI Data Centres Fuel Component Shortages
The primary driver is the surging demand for DRAM and other components used in AI data centres. According to Andy Robinson, editor-in-chief of gaming news site VGC, initial price increases were triggered by tariffs imposed by Donald Trump in early 2023. Then, in October, OpenAI struck a deal with Samsung and SK Hynix to acquire a huge portion of their DRAM output, causing prices to jump nearly 200%. Xbox later reported that those prices have since doubled again, with no expectation of a near-term decline.
Piers Harding-Rolls, games industry analyst at Ampere, notes that the memory market is dominated by just three companies—Samsung, SK Hynix, and Micron—and building new factory capacity takes years. He expects hardware companies to wait until early 2028 for capacity to open up, but it remains uncertain whether this will stabilise or reduce memory prices. Lenovo executive director Martin Hiegl recently suggested that memory prices may never return to previous lower levels.
Sales Plummet as Prices Soar
The price hikes have hit console sales hard. Typically, consoles at this stage of the generation would see significant discounts, but the cheapest PS5 now costs 50% more than in 2020, an unprecedented situation. In the US, hardware sales in November—usually the biggest month—hit 30-year lows, with the average price of new hardware reaching a record $439. Last month, that figure climbed to $502, and Xbox recorded its worst May ever for hardware sales, while PS5 sales were down 58% year-on-year.
Next-Gen Consoles Could Cost $1,000
Analysts predict that the PlayStation 6 could retail for at least $1,000 USD, matching the price of Valve's Steam Machine. This would break the long-standing industry practice of selling consoles at a loss to keep prices accessible. The PlayStation 2 and Nintendo DS, two of the best-selling consoles ever, launched at £299 and £99 respectively. Microsoft is already offering buy-now-pay-later plans and interest-free financing on Xbox models, a trend likely to continue with next-gen platforms.
Robinson suggests that cloud gaming might become more attractive for both consumers and creators, especially with the anticipated release of GTA 6. GTA V has sold 230 million copies since 2013, but only a fraction of those fans have moved to current consoles. A single GTA 6 trailer garnered 475 million views in 24 hours. While there are no plans for cloud streaming of the new game, if consumers resist buying expensive hardware, publisher Take-Two might turn to the lucrative streaming market.
Rethinking Console Cycles
Xbox and PlayStation already offer cloud gaming services, but they depend on excellent broadband, which limits resolution for many users. Sony's Hideaki Nishino has discussed a hybrid approach similar to the Nintendo Switch, and there are rumours that Sony may delay the PS6 launch until 2029, hoping for lower manufacturing costs and giving consumers financial breathing space. Chris Dring, editor-in-chief of the Game Business, argues that the visual differences between generations are shrinking, and questions the need for a PS6 when even major titles like a new Naughty Dog game have not yet appeared.
Digital Content Concerns
Elsewhere, the perils of digital ownership have been highlighted as 550 films are set to be removed from PlayStation 5 video libraries due to the end of a licensing deal with Studio Canal, even if users purchased them. This has intensified tensions around digital content, with the pressure group Stop Killing Games planning legal action against publishers over ending support for legacy titles. Meanwhile, Sony's Nishino has expressed interest in revitalising live service games, despite the company cancelling its hero shooter Concord after just two weeks.
