PS5 Pro to sell over 10m units

Sony’s PS5 Pro, a mid-generation upgrade to the PS5 priced at $699, builds on the company’s mid-generation refresh strategy first introduced with the PS4 Pro in 2016. However, while the PS4 Pro had a $399 entry point and simple marketing message in terms of 4K graphics and HDR, the PS5 Pro is a slightly harder sell given its high price point and less straightforward marketing message, opting for more nuanced messaging in terms of upgraded graphics, advanced raytracing, and AI-driven upscaling. In both cases, the Pro models are premium products tailored for a niche audience that is willing to pay for increased graphical fidelity. In fact, Sony themselves stated that 75% of players prefer performance mode that puts framerate above graphics.

Sony is looking to achieve two goals with the PS5 Pro:

Offer the most powerful console gaming experience on the market
Increase hardware ARPU and profit margins across its console business

With no comparable mid-generation upgrade from Microsoft, and Nintendo’s upcoming console expected to be less powerful than the base PS5, Sony is positioning the PS5 Pro as a premium offering for console gamers seeking superior graphics performance. Although the $699 price point will make PS5 Pro the most expensive console on the market, it is still priced lower than a comparable gaming PC. This is essentially a luxury offering for gamers who already have a console game library and value living room experience, convenience, and guaranteed performance.

At the same time, Sony is also responding to the realities of the current console market. Manufacturing costs, including component prices such as for SSDs, continued to remain high post pandemic and have squeezed hardware margins. The lack of overall console install base expansion from prior generations has also led to console platform holders maximizing spend per user and even expanding beyond the console. The PS5 Pro also looks to act as a counterbalance to the lower priced PS5 Digital Edition that was sold at a loss from day one with the aim to drive adoption of the platform.

The PS5 Pro’s digital only offering is also a response to shifting consumer behavior. 70% of all full games sold for PlayStation were via digital download during the 12-month period ending March 31, 2024, with this increasing to 80% in the last quarter. This trend has fundamentally changed the economics of console software, as digital sales and add-on content generate increased revenue and higher margins for both publishers and platform holders. It also reduces the opportunity for second-hand game sales, enhancing profitability. We fully expect the PS6 to launch without a disc drive model at this point, although an optional disc drive add-on may still be offered.

We believe the main audience for the PS5 Pro are early adopters of the PS5 and price insensitive gamers on other current or last generation consoles looking for higher fidelity experiences. We also expect to see increased geographic expansion compared to the PS4 Pro as Asia and the Middle East, which have become notable markets for PlayStation, see a rising middle class willing to invest in high-end entertainment. In our recent blog post on the success of Black Myth: Wukong in China, we noted that PS5 sales had increased significantly due to the popularity of the game.

According to Niko’s 2024 Gamer Behavior & Market Insights Reports, PlayStation is the leading console brand by market share in Asia excluding Japan. We note that Japan is unique in this case as the Nintendo Switch accounts for over 60% market share there. However, Japan is the leading market in Asia in terms of absolute PS5 units sold, with over 6 million as of September 2024. Interestingly, Niko’s research found that within Southeast Asia, PlayStation has the highest market share in Indonesia, Malaysia, and Thailand by a notable margin when compared to other SEA markets, although the absolute number of units sold is much lower. PlayStation is also the leading brand by market share in the MENA region, with many first party titles being translated into Arabic due to the growing demand.

Source: Niko Partners 2024 (Includes India, Indonesia, China, Malaysia, Philippines, Singapore, South Korea, Thailand and Vietnam)

The base PS5 models will continue to be the main entry point into current gen gaming, and we continue to see the PS5 Digital Edition increase its market share due to its lower price and increasing acceptance of digital only gaming. A price drop for the base models, combined with major releases like Grand Theft Auto 6, would be far more impactful in expanding the PS5’s installed base. However, we do not expect to see a price drop on PlayStation hardware this year or in the first half of 2025. We estimate the PS5 Pro will account for roughly 10% of lifetime PS5 sales, pushing it over 10 million units.

Sony’s focus on increasing margins through high-end hardware, digital content, and premium services mirrors broader industry trends. Across the board, we see rising subscription prices, digital-only game releases, and a lack of hardware price drops, which are indicative of a focus on maximizing ARPU within a console market where platform holders are no longer seeing substantial install base growth. Sony is positioning the PS5 Pro as a premium product to drive hardware profitability while further cementing its position as a leading console brand.

In fact, we believe that one of the reasons why Nintendo did not launch its next generation console in 2023 or 2024 is because Nintendo wants to ensure it can launch at a competitive price point without sacrificing its traditional hardware profit margin. Other reasons include the need for a strong software lineup from day one and that the Switch has had a stronger tail than previous Nintendo consoles.

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PS5 Pro to sell over 10m units with Asia & MENA playing a larger role