PS5 vs. New Xbox: Console Makers Flash Warning Sign About Price Hikes
The big three are worried about price-hikes.
The PS5 and the new Xbox consoles due in 2020 were set to pleasantly surprise gamers on price. The pressure of ascendant streaming networks have made consoles a tougher sell, and even cutting-edge specs won’t be enough to justify a huge price tag. But that sunny future was cast into doubt on Wednesday.
This is according to none other than the Triforce of console gaming itself — Sony, Xbox, and Nintendo — who issued a joint statement on June 17. The statement served as a warning to the government that tariffs on Chinese goods will push up console prices and send ripple waves through the industry.
Sony, Microsoft, and Nintendo argue that the administration’s 25 percent levy on $250 billion of Chinese imports would have a top-to-bottom chilling effect on the gaming industry. They assert that trade tensions between the United States and China will lead to more expensive consoles and games, stifle sales, risk thousands of jobs, and hinder the development of next-generation consoles. All three companies have new consoles on the horizon, including Sony’s PlayStation 5, the Xbox Scarlett, and new Nintendo Switch models.
The seven-page letter, addressed to the Office of the United States Trade Representative, highlights the indispensable role Chinese manufacturing plays in producing affordable consoles and games. It states that over 96 percent of consoles sold in the U.S. in 2018 were made in China and that tariffs would cost console-craving consumers $840 million more this holiday season alone.
These price hikes, they argue, would have knock-on effects. If fewer people buy games this year, that means less money to invest in console tech and game content next year. The latest tariffs could even jeopardize some of the cutting-edge PS5, Xbox Scarlett, and new Nintendo Switch features and specs that already have gamers drooling.
Here’s the snippet of the statement that explicitly references the companies’ next-gen devices:
“Microsoft, Nintendo, and [Sony Interactive Entertainment] collectively invest billions of dollars in research and development in the U.S. to develop and deliver inventive consoles and next-generation technology to our customers. Microsoft, for instance, has over 2,000 issued and pending U.S. patents for innovations originally created for gaming. Instituting tariffs would lead to reduced [research and development] investment, as console makers scale back on revolutionary new technologies.”
Impacts on the gaming industry wouldn’t stop there. If the tariffs continue, PC gamers should also expect higher prices for components like CPUs, graphics cards, and motherboards. Four-figure gaming rigs would get even more expensive for the PC subset.
The upcoming generation of consoles is expected to put more power at gamers’ fingertips than ever. Not only that, but these consoles are also expected at reasonable prices. Businesses of all stripes tend to oppose any new taxes on them at all, obviously, but research does show that the additional costs from trade disputes tend to get passed on to consumers in the tariff-issuing country.
Unfortunately for gamers, these extra gaming costs are coming at the worst possible time. After all, a new console only comes out every four or five years.