Level up in price: The cost explosion of consoles

Gamereactor was only a few years old, social media didn't exist in the same way as it does today, and Neogaf was my obvious online watering hole. Everyone was hanging out there and countless big news stories started via the forum. One of the biggest events that people kept a close eye on was the price of game consoles.

Console manufacturers were playing 4D chess with each other and following the price drops was extremely interesting. It revealed things like how sales were going, what the consoles cost to produce, how a console manufacturer was doing, and much more. Before price cuts, which often came after a period of low sales, there was much speculation about when the time would come and what the updated price tag would be.

However, there was no speculation at all about whether prices would be raised. There was no such thing as a price increase at all, other than possible adjustments as a result of currency changes and the like. An electrical gadget gets older and more and more outdated with each passing day, which should be reflected in the price tag, so a console halving in price after about five years was an expected matter and that was when the so-called casual audience stepped in.

But... it feels like a lifetime ago. This generation has been a completely different beast. When the PlayStation 5 and Xbox Series X got their respective prices set, people were half shocked at how expensive they were, with Sony's console going for £450 and Microsoft's being the same. However, the scalping at launch made them cost significantly more, and there were countless articles written about how unreasonable that was.

Scalping is always completely unreasonable and unethical, but you can probably guess where I'm going - namely that today we pay scalping prices for the same consoles after they have actually gone up in price since launch. Not just once, but several times. There are several reasons for this, starting with significantly higher costs in connection with the pandemic, followed by a huge desire for silicon since AI became the new black in the computer industry. Component prices have thus increased in such a way that it has not been possible to reduce prices.

In addition, all the subsidies and the like in connection with the pandemic caused inflation to skyrocket. You probably remember the headlines about how prices went up at turbo speed and made us all poorer. This, of course, also contributed to pushing up price tags.

Then there are factors like Vladimir Putin and Russia deciding it was worth blowing up a country and sacrificing up to a million of their own people to take some land from a neighbour - leading to various operations that cost money.

But... what has affected the last month and a half is the US tariffs, where President Trump has said several times that it is like taxing other countries - after which he has gone back and forth under harsh criticism, while some countries seem to cooperate more closely to bypass the US. We don't yet know how this will end, but it is clear that there will be talk of high tariffs and they will need to be paid. Whichever way we look at it, all the costs will fall on consumers.

Reasonably, it would be the US gamers who would have to pay for more expensive consoles, accessories, and physical games, but it seems that Microsoft and Nintendo are reluctant to make their products much more expensive in the US. It is likely that a large discrepancy in prices would have upset the Trump administration and risked various types of action, as well as leading people to start importing hardware from Canada and Mexico in particular, so now we are also having to help pay for the US tariffs.

So, when will prices fall again? The sad thing is that I think this is something we can forget in the near future. Unless President Trump, under pressure from the market and public opinion, turns round and ends the tariff war, there are many indications that prices will increase instead. Sony has raised prices several times in the past, and just last month it increased the price of its consoles in parts of the world, probably to compensate for the US tariffs. Daniel Ahmad, head of research at Niko Partners, and one of the most prominent in the industry, wrote recently on Bluesky:

"I must emphasise that what you see here is just the beginning. Sony will be affected by the same tariffs, and we've already seen them raise prices elsewhere to offset the impact. Nintendo didn't raise prices because they manufacture in Vietnam, but may do so if tariffs increase."

Another notable figure, MST Financial analyst David Gibson, recently made headlines by suggesting that the PlayStation 5 in the US could cost the equivalent of over $1,000. Since then, we have seen that publishers are reluctant to let the Americans take the full brunt, which also contributes to the fact that prices are likely to continue climbing. We don't know where the ceiling is yet, but it is clear that perhaps the consoles' main weapon is about to slip out of its hands.

For a long time, simplicity and low price (compared to a gaming PC) have been the defining characteristics of video games. But in recent years, PCs have come a long way and playing via Steam is really no more complicated than a console. And if the consoles are going to cost $1,000, we're starting to get into a situation where it becomes financially more advantageous to buy a computer instead.

Sure, a decent gaming PC is more expensive anyway, but you don't have to pay for online multiplayer and the games are on average around $20 cheaper each. It won't take very long to make up that difference and have a more powerful gaming device that has access to significantly more games. This is something that should really worry Sony in particular, but also Microsoft (though they seem to be moving towards a PC future and are doing okay, but they are far from there yet) and Nintendo.

The most worrying thing about this development is that within four years we will have both a new PlayStation and Xbox - and later this year there will likely be a portable Xbox from Asus. What will these devices cost if five-year-old hardware goes for around £550? The idea that these would cost less than £800 seems almost like a utopia at present, and unfortunately I fear that the worst is ahead of us and risks seriously damaging this wonderful form of entertainment.