[0:00] - After six months of talking
about the RAM crisis coming,
[0:03] it is officially here.
[0:05] Switch 2, $50 more expensive,
[0:07] PS5 and Series X, $150 more.
[0:10] Now, Valve haven't raised
the price of the Steam Deck
[0:12] because it's been out of stock for months.
[0:14] I mean, look, this is not
what's supposed to happen.
[0:17] The older a console is, the
cheaper it's supposed to be.
[0:20] So where is my dang price drop?
[0:22] The answer is not
anytime soon, my friends.
[0:25] The result is that PS5 sales are tanking
[0:28] and this is directly
affecting the next generation.
[0:31] When asked how the RAM crisis
[0:32] will affect the PlayStation business,
[0:34] Sony's CFO immediately pivoted to the PS6
[0:37] with, quote, "We have not
yet decided on what timing
[0:40] we will launch the new
console or at what prices."
[0:43] Not a, "We don't comment
on future hardware."
[0:46] They are publicly telling investors
[0:48] that the chip shortage is causing them
[0:49] to rethink their next generation plans.
[0:51] This points in one big direction for me.
[0:54] The current generation of hardware
[0:55] isn't going anywhere anytime soon.
[0:58] As bad as prices are now,
[1:00] it looks like things
are going to get worse
[1:01] before they get better.
[1:02] The reason for all of this
is, of course, the RAM crisis.
[1:05] AI data centers are absorbing
[1:06] the world's supply of memory, storage,
[1:08] and quickly CPUs and GPUs as well.
[1:11] This has caused prices to
spike and supplies to plummet
[1:14] as the few foundries actually
making cutting-edge stuff
[1:16] have pivoted to where
the money is: AI, baby.
[1:19] You know what we don't have enough of?
[1:21] Data centers.
[1:21] PlayStations? (scoffs) No
one needs PlayStations.
[1:24] Who needs Switches?
[1:25] I just need more data centers in my life.
[1:28] But it's not just the RAM crisis
[1:30] that companies have to deal with.
[1:31] Back in April 2nd of last year,
[1:33] Nintendo famously announced
the $450 price of the Switch 2.
[1:38] Now, this was an unpopular decision.
[1:39] Myself and many others
expected it to be $400.
[1:42] But the real story was what
also happened on April 2nd.
[1:45] The US slapped massive tariffs
[1:47] on, well, basically everything
[1:50] and absolutely the Switch
2 was caught up in it.
[1:52] Now, this really caught
Nintendo by surprise.
[1:55] That night, their president
at the time told "The Verge"
[1:58] that their $450 price tag was decided on
[2:01] without factoring in
potential 40%-plus tarriffs.
[2:04] Now, this caused Nintendo
to delay the pre-order date
[2:07] and openly consider whether or not
[2:09] they actually needed to raise the price
[2:10] before they shipped a single console.
[2:12] Now, ultimately, they did
opt to stick it out at $450,
[2:16] probably 'cause they had already committed
[2:17] to making millions and
millions of Switch 2s,
[2:20] which did enable one of the
largest console launches
[2:22] of all time.
[2:23] A year on, it's clear
this was a smart move.
[2:26] Within the first couple of months,
[2:27] Switch 2 stock was plentiful
basically everywhere,
[2:30] a far cry from earlier Nintendo launches
[2:32] where consoles were hard to find
[2:33] for sometimes years after launch.
[2:35] Well, except the Wii U.
[2:37] No one gave a (beep).
[2:38] - [Alex] Hey!
[2:39] - You know what?
Actually, that's not true.
[2:40] The Wii U did sell out,
[2:42] but once it got restocked, it never moved.
[2:44] But with tariffs still not
totally out of the picture,
[2:47] Nintendo have run into another problem:
[2:49] the same RAM crisis the entire
industry is dealing with.
[2:52] At this point, both Sony and
Microsoft have raised pricing
[2:55] by a full $150,
[2:57] and meanwhile, every time
someone asks Nintendo
[2:59] about price hikes,
[3:00] up until this point, they basically say,
[3:02] "Nah, we good, fam.
[3:03] Don't worry about it."
[3:04] And then suddenly,
[3:06] with everything else being more expensive,
[3:07] that $450 price tag
actually didn't look crazy.
[3:10] However, they have finally given in.
[3:13] Believe me, I am not gonna sit here
[3:14] and tell you that price
hikes are a good thing.
[3:17] But something to know about Nintendo
[3:19] is that unlike Sony and Microsoft,
[3:21] they extra traditionally
sell console hardware
[3:23] at a small profit.
[3:24] But thanks to all of this,
[3:25] they're supposedly selling the Switch 2
[3:27] at a pretty significant loss
[3:29] and the investors have been really
[3:30] hammering Nintendo over it.
[3:32] So the fact that they only
are raising the price by $50,
[3:35] it's not as bad as it could have been,
[3:37] and they're giving everyone
plenty of heads up.
[3:39] The price doesn't hit
$500 until September 1st,
[3:42] giving you nearly four months,
[3:44] as opposed to Sony,
[3:45] who gave everyone less than a week
[3:47] before hiking the PS5 price.
[3:49] The other interesting story here
[3:50] is Nintendo's other forecast.
[3:52] They're expecting to sell
[3:53] just 16.5 million Switch 2s the next year
[3:56] compared to analyst estimates
before the price hike
[3:58] of over 20 million.
[4:00] So, essentially, Nintendo
is telling investors,
[4:02] "Yeah, we're raising the price
[4:04] and, yeah, we are gonna
lose customers over it."
[4:07] Now, I kind of get it.
[4:08] I mean, even for a big
company like Nintendo,
[4:11] losing a significant amount of money
[4:12] on each console that goes
out the door adds up quick,
[4:16] but they kind of don't
really have a choice.
[4:19] Xbox at least has the Series
S as a semi-budget option.
[4:23] Nintendo, they only have the
original nine-year-old Switch,
[4:26] which is absolutely showing
its age at this point.
[4:29] Not to mention they're
also raising prices on it
[4:31] in some regions for the second time.
[4:34] So what can they do?
[4:36] Well, I think there's an obvious answer.
[4:38] Give us the Switch Lite 2.
[4:40] We demand the Lite life.
[4:42] I want a Switch Lite 2.
[4:44] Give me a Switch Lite 2.
[4:45] The more times I say this,
[4:47] the more I'm going to
will it to existence.
[4:49] Look, here's the thing.
[4:50] As I've discussed many
times, the Switch Lite,
[4:52] the best version of the Switch.
[4:53] It was the cheapest, it was the smallest,
[4:55] it was the cutest,
[4:56] which is the only thing I care about
[4:57] when I'm buying consoles.
[4:59] The original Switch Lite
came out three years
[5:01] after the original.
[5:02] So if Nintendo are gonna
follow a similar timeline,
[5:05] we're looking at 2028,
[5:06] and I personally think that's a long time
[5:09] to ask people to pay $500
without a cheaper option.
[5:13] All things being considered,
[5:14] I actually do think Nintendo
will ride this one out.
[5:16] I mean, especially if
they keep that solid slate
[5:18] of Switch 2 games going, like
"Pokopia" and "Donkey Kong."
[5:22] I mean, people who want a Switch 2
[5:24] are still going to mostly buy one.
[5:26] Now, PlayStation, PlayStation
has a backup plan, right?
[5:31] Sort of? Maybe?
[5:32] Oh, they don't. Oh, oh, no.
[5:35] Their recent earnings call was brutal.
[5:37] The PS5 had its worst quarter of all time,
[5:40] down 46% compared to last year.
[5:43] This means that the PS5 is
now actually trending behind
[5:46] where the PS4 was at this
point in its lifecycle
[5:49] by a full 3.3 million consoles.
[5:52] This is a very different problem for Sony.
[5:53] I mean, sure, the pandemic supply chain
[5:56] caused a lot of issues
when the PS5 launched,
[5:58] but as recently as a year ago,
[6:00] the PS5 was trending ahead of the PS4.
[6:02] There is a very clear culprit.
[6:04] The price has been massively hiked.
[6:06] I mean, the PS5 now costs $650,
[6:09] a full $150 more than it did last year,
[6:12] and the PS5 Digital is worse.
[6:14] It is now $200 more expensive
[6:16] than it was when it launched back in 2020.
[6:19] For a console that's taken five years
[6:21] to finally hit its stride,
[6:23] this is a really, really bad look.
[6:25] In their investor brief,
[6:26] they discuss how many
PS5s they sell this year
[6:28] are almost entirely being gated
[6:30] by how much memory they
can get their hands on
[6:33] at, quote, unquote, "reasonable prices."
[6:36] And it's not just hardware.
[6:37] Sony took a $565 million write-down
[6:40] on Bungie this quarter,
[6:42] essentially admitting that "Marathon"
[6:43] isn't going to save things.
[6:45] Sony's stock is down over 20%
since the start of the year
[6:48] and, I mean, there's just
not a lot of good news here.
[6:51] Now, it's not a full-on disaster.
[6:53] I mean, the PS5 isn't
exactly going anywhere.
[6:55] But the bigger problem
really is what comes next.
[6:58] Now, when Sony's CFO talks
about "changing business models
[7:02] to come up with the best
solution and strategy,"
[7:04] he's not just being PR safe,
[7:06] and that's definitely
not what he sounds like.
[7:07] Now, I believe Sony when
they discussed not knowing
[7:10] when they'll actually release the PS6.
[7:12] I mean, at this point,
the PS6's architecture
[7:15] is more or less locked.
[7:16] They've been working with AMD
on Project Amethyst for years.
[7:19] Their supplier contracts
are signed at this point.
[7:22] I mean, they can't just tear it all up
[7:24] and redesign the console
because RAM doubled in price
[7:27] or tripled in price,
maybe quadrupled in price.
[7:30] And things are kind of not heading
[7:32] in the right direction either.
[7:33] Most companies are expecting 2027
[7:35] to be worse for memory
than this year, not better.
[7:38] So whether Sony launches
the PS6 in late 2027
[7:42] or they push it to 2028 or even 2029,
[7:44] they might be walking into
a more expensive environment
[7:47] than what we're seeing right now.
[7:48] I mean, there's just no good answer here.
[7:50] Delaying doesn't
necessarily fix the problem.
[7:53] I think this is why they're talking
[7:54] about new business models out loud.
[7:57] So the rumors point to
an upcoming PS6 Lite,
[8:00] which would be Sony's
lower price PS6 variant.
[8:03] So based on the leaks,
[8:04] this would be a third
member of the PS6 family,
[8:06] alongside the core PS6
as well as the handheld.
[8:09] Basically the PlayStation
TV all over again.
[8:12] Ship the portable PS6,
[8:13] but in a smaller form factor
with no screen or battery
[8:16] really as a true
competitor to the Series S.
[8:19] I think the reason why
the Series S did work
[8:21] is that it matched the performance
[8:22] of the pro version of the
Xbox One, being the One X,
[8:25] while still costing a lot less
[8:27] and with all the benefits
[8:28] of the current generation
CPU, SSD, and graphics.
[8:32] Sure, it targets 1080p,
[8:33] but for a very long time,
[8:35] the Series S was the best deal in gaming.
[8:37] If the PS6 Lite can deliver
good PS5-beating performance
[8:41] at a significantly lower price point,
[8:44] great, problem solved,
[8:45] but I have some doubt about
how cheap it really will be
[8:49] and how many compromises
they'll need to make
[8:51] on the performance side of things.
[8:52] Sure, there are other levers
they could play with too.
[8:54] I mean, they could try to
ship it without a controller
[8:56] to save some money.
[8:57] They could give you discounts
[8:58] based on subscribing to PlayStation Plus
[9:01] or maybe some kind of all access plan
[9:03] like Xbox used to offer.
[9:04] I mean, being creative
on bringing prices down
[9:06] is a good thing.
[9:07] But if anyone from Sony is watching,
[9:10] I have a different pitch.
[9:11] Come out and say it with me:
the PS5 shouldn't go anywhere
[9:16] for many, many years to come.
[9:18] Now, not as a, like, we still
support your old hardware
[9:21] kind of thing.
[9:22] No, I mean make the PS5
the actual budget tier
[9:24] that sits below the PS6.
[9:26] Keep it up to date with
the same software updates,
[9:28] the same games as much as possible.
[9:30] I mean, the same ways that
the PC supports everything
[9:32] from "Roblox" to "Pragmata,"
[9:34] the PS6 should exist as an upper tier
[9:36] to push things forward,
[9:37] but alongside the PS5,
[9:39] at least until they can
actually sell a next-gen console
[9:41] at a reasonable price.
[9:42] Now, Sony has hinted at
this in earnings calls,
[9:44] but they keep stopping
short of saying it directly.
[9:47] But if you tell people right now
[9:49] that the PS5 that they buy today
[9:51] is going to be a supported current console
[9:54] for the next four, five years plus,
[9:56] even after the PS6 has launched,
[9:58] I think that goes a long way.
[10:00] I mean, sure, $650 is a
lot of money for a console,
[10:03] but, like, wouldn't you feel better
[10:05] about knowing that that
PS5 you just bought
[10:08] will actually still be relevant
for a long (beep) time.
[10:11] That's the specific phrase actually.
[10:13] PS5, relevant for a long (beep) time.
[10:16] And here's the thing,
[10:17] I think Sony should stick with the PS5,
[10:19] but I think Xbox have to.
[10:22] Sony is launching the PS6 from a position
[10:24] of, I would say, relative strength, right?
[10:26] I mean, even after a very rough quarter,
[10:28] they've still got the install base,
[10:29] they've got the games,
they've got the brand.
[10:31] The PS6 is going to sell fairly well,
[10:34] no matter if it launches at $600 or $800.
[10:38] But Xbox doesn't have that luxury.
[10:39] Hardware revenue there is
down over 30% year over year,
[10:43] the Series X and the Series
S has been price hiked twice,
[10:46] and whenever the Xbox
Project Helix does launch,
[10:48] all of signs point to
it being premium priced.
[10:51] 800 to a thousand dollars there
[10:52] wouldn't surprise me one bit.
[10:54] Which is why if Xbox is smart,
[10:56] they should also commit to
the Series S and the Series X
[10:59] being fully supported
alongside Project Helix.
[11:02] To me, I think that the
current generation of consoles
[11:04] are powerful enough, right?
[11:06] Like, they're not holding gaming back
[11:07] like previous generations.
[11:09] There should be no rush to
leave millions of gamers behind
[11:12] when the alternatives are
very, very expensive consoles.
[11:16] Now, there's a lot more to talk about
[11:17] on the Xbox side of things,
[11:19] so make sure to subscribe to the channel.
[11:20] We'll be breaking that
all down into video soon.
[11:23] But if we step back for a second,
[11:25] Sony are being pushed by the RAM crisis
[11:27] toward potentially kind of compromising
[11:29] what that next generation
is actually gonna look like.
[11:31] Xbox are doing what they can to come back.
[11:34] Nintendo, I mean, they're
off to a good start
[11:36] with the Switch 2,
[11:37] but they're definitely
not immune to any of this.