AI datacentres, memory scarcity and factory capacity are costing consumers – and console makers
It was once a widely accepted notion that an aging game console with strong sales would eventually see a price reduction. However, this trend appears to be changing. In March, Sony announced a £90 price increase for the PlayStation 5, and last month Microsoft revealed that from August, the Xbox Series S and X consoles would cost at least £75 more. All three consoles were initially released in 2020. Additionally, the upcoming Switch 2 is expected to be more expensive globally starting in September.
The primary factor behind these price hikes is the rising demand for semiconductors and memory chips driven by artificial intelligence (AI) datacentres. Previously, console manufacturers could procure these components at lower costs, but the surge in demand has outpaced supply, leading to increased prices and complex negotiations.
“Initially, the wave of price increases seen in gaming were driven by tariffs imposed by Donald Trump early last year,”said Andy Robinson, editor-in-chief of gaming news site VGC.
“Then, in October, OpenAI announced a deal with and [Korean chip manufacturer] SK Hynix to acquire a huge portion of their DRAM output for datacentres, causing prices to increase by almost 200%. According to Xbox, those prices have since doubled again, and they’re not expected to come back down any time soon.”
The situation is further complicated by the limited number of companies controlling the memory market.
“The market for memory is controlled by three major companies – Samsung, SK Hynix and Micron – and building factory capacity takes years to achieve,”explained Piers Harding-Rolls, games industry analyst at Ampere.
“It looks like hardware companies will be waiting until the beginning of 2028 for factory capacity to open up, but it’s not clear if this will actually stabilise or reduce prices for memory.”Lenovo’s executive director, Martin Hiegl, recently suggested that memory prices might continue to rise.
These price increases have negatively impacted console sales.
“Typically, at this stage of the generation, consoles could be picked up at significant discounts, but the cheapest PS5 now costs 50% more than it did in 2020 – real, unprecedented territory,”Robinson noted.
“In the US, there’s evidence that the market has reacted negatively. Last November, which is typically the biggest month of the year for the industry, hardware sales hit 30-year lows. Notably, the average price of new hardware hit an all-time high of $439. Last month, that figure increased to $502, and recorded its worst May ever for hardware sales, while PS5 was down 58% year-on-year.”
The outlook for the next generation of consoles is similarly challenging. Reports suggest that the PlayStation 6 could retail for at least $1,000 USD, matching the price point of Valve’s new console-like PC, the Steam Machine. This represents a departure from the longstanding industry practice of offering affordable hardware. Historically, Sony and Microsoft absorbed losses on each console to maintain lower prices, while Nintendo used more cost-effective components. Two of the best-selling consoles ever, the PlayStation 2 and Nintendo DS, were noted for their accessible launch prices of £299 and £99, respectively.
The prospect of paying four figures for a gaming console may deter many potential buyers. Microsoft is offering “buy now, pay later” plans and interest-free financing on Xbox models, likely to extend to next-generation platforms. However, Robinson suggests that hardware may become less critical in the future as cloud gaming gains appeal for both consumers and creators.
“Especially when GTA 6 is about to drive an incredible amount of interest in gaming from those who might not have modern consoles.”GTA V has sold 230 million copies since its 2013 launch, but only a small portion of those players have upgraded to current consoles. The GTA 6 trailer attracted 475 million views within 24 hours. While there are no plans to enable cloud play for the latest iteration, if consumers resist purchasing new hardware, Take-Two might explore the lucrative streaming market.
Xbox and PlayStation operate cloud gaming services, but these rely heavily on high-quality broadband and often have resolution limitations for many users. An alternative approach may involve extending console life cycles and diversifying offerings. In 2023, Hideaki Nishino, president and CEO of Sony Interactive Entertainment, discussed the company’s handheld remote-play device and suggested that a hybrid console model similar to the Nintendo Switch could provide gamers with more options. Rumors indicate Sony might delay the PlayStation 6 launch until as late as 2029, potentially to wait for manufacturing costs to decrease and to give consumers financial relief.
“We do need to rethink consoles,”said Chris Dring, editor-in-chief of the Game Business.
“The difference between each new generation was getting smaller from a visual perspective. We were at a stage where, to quote [former Sony boss] Shawn Layden, ‘we’re seeing graphical differences only dogs could hear’. Why do we need a PS6? We’ve not even had a Naughty Dog game yet. And I think that’s a question Sony is looking to answer.”
What to play
Originally released on the Wii U console in 2014, Scram Kitty was an engaging and innovative 2D puzzle game. Players controlled a robotic skateboard navigating the walls of a vast space station to rescue kidnapped cats. The updated version, Super Scram Kitty, is now available for the Nintendo Switch, retaining its intense, imaginative, and unique gameplay. The game combines elements reminiscent of Tony Hawk’s Pro Skater, Gravitar, and Sonic the Hedgehog, featuring jumping, grinding, and ricocheting between surfaces while collecting gold coins and avoiding enemies. It evokes the feel of a classic SNES or Mega Drive title lovingly restored.
Available on: Nintendo Switch
Estimated playtime: 10 hours plus
What to read
The challenges of digital content ownership have been highlighted recently. A total of 550 films will be removed from PlayStation 5 video libraries, even for users who have purchased them. This is due to the expiration of a licensing agreement with distributor Studio Canal. This development occurs amid growing tensions in the games industry regarding digital content, leading to the formation of a pressure group planning legal action against publishers over discontinued support for legacy games.
Interestingly, Sony Interactive Entertainment CEO Hideaki Nishino has expressed a desire to revitalize the live service games sector, which is currently dominated by titles such as Fortnite, Roblox, and Minecraft. However, two years ago, Sony cancelled its multimillion-dollar hero shooter Concord after only two weeks, though customers received refunds in that instance.
Additionally, The Conversation has published an article exploring how video games address climate migration, examining titles that depict the forced displacement of people due to climate change and their arduous journeys across continents.
What to click
Question Block
A notable question from Jamie this week:
“I just took my son to see Supergirl and, naturally, he wants to play the video game. Is there one?”
Unfortunately, there is no dedicated Supergirl video game. However, actor Milly Alcock’s portrayal of Supergirl has been added to Fortnite, along with her sidekick Krypto. These characters are available as downloadable content in the item shop with various outfit styles, accessories, and poses. The Supergirl character alone costs 1,400 V-bucks (approximately £9), while the full bundle costs 3,400 V-bucks (about £30). Supergirl also appears in the TV series Supergirl and Justice League, as well as the fighting game Injustice 2, where she is voiced by veteran actor Laura Bailey. Note that Injustice 2 is a violent game, similar to Mortal Kombat with superheroes, and may not be suitable for younger children. If your son is interested in Superman games, be cautious as many are considered poor quality. Recommended titles include The Death and Return of Superman on the Super Nintendo and, to a lesser extent, Superman Returns on Xbox 360. Superman also features in Injustice 2, which could allow for a family Krypton-themed matchup.
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