PS5 Pro will sell over 10 million units with Asia & MENA playing a bigger role

Sony’s PS5 Pro, a mid-gen upgrade to the PS5 priced at $699, builds on the company’s mid-gen refresh strategy first introduced with the PS4 Pro in 2016. However, despite the PS4 Pro’s $399 entry point and modest marketing message in terms of 4K graphics and HDR, the PS5 Pro is a bit of a harder sell given its high price and less straightforward marketing message, opting for a more nuanced message in terms of improved graphics, advanced ray tracing and AI-based enhancements. In both cases, the Pro model is a premium product designed for a niche audience willing to pay for increased graphical fidelity. In fact, Sony itself states that 75% of players prefer a performance mode that prioritizes framerate over graphics.

Sony wants to achieve two goals with the PS5 Pro:

1. Offers the most powerful console gaming experience on the market
2. 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 looking for superior graphics performance. While the $699 price tag would make the PS5 Pro the most expensive console on the market, it’s still lower than comparable gaming PCs. This is essentially a luxury offering for gamers who already have a library of console games and value a living room experience, comfort and guaranteed performance.

At the same time, Sony is also responding to the realities of the current console market. Production costs, including the prices of components such as SSDs, remain high post-pandemic and have squeezed hardware margins. The lack of expansion in the overall console install base from the previous generation also caused console platform holders to maximize spending per user and even expand beyond consoles. The PS5 Pro also appears to act as a counterweight to the lower-priced PS5 Digital Edition which sold at a loss from day one with the aim of encouraging adoption of the platform.

The PS5 Pro digital offering is also a response to changing consumer behavior. 70% of all full games sold for PlayStation were via digital download during the 12-month period ending March 31, 2024, and this figure increased to 80% in the last quarter. This trend has fundamentally changed the economics of console software, as digital sales and additional content generate increased revenue and higher margins for publishers and platform holders. This also reduces the chances of selling used games, thereby increasing 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 PS5 Pro’s primary audience will be early PS5 adopters and gamers who are not price sensitive on current or other last-gen consoles who are looking for a higher-fidelity experience. We also expect to see increased geographic expansion compared to PS4 Pro as Asia and the Middle East, which have been important markets for PlayStation, see an increasing desire by the middle class to invest in high-end entertainment. In our recent blog post about the success of Black Myth: Wukong in China, we noted that PS5 sales increased significantly due to the game’s popularity.

According to Niko’s 2024 Gamer Behavior & Market Insights Report, PlayStation is the leading console brand by market share in Asia excluding Japan. We note that Japan is unique in this regard as the Nintendo Switch commands over 60% of the market share there. However, Japan is the leading market in Asia in terms of absolute sales of PS5 units, with more than 6 million units as of September 2024. Interestingly, Niko’s research found that in Southeast Asia, PlayStation has the highest market share in Indonesia, Malaysia and Thailand by a similar margin. quite large when compared to other Southeast Asian 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 translated into Arabic due to increasing demand.

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

The base model PS5 will continue to be the primary entry point into current generation 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 games. A price drop for the base model, combined with a major release like Grand Theft Auto 6, would be much more impactful in expanding the PS5’s installed base. However, we don’t expect any price drops for PlayStation hardware this year or in the first half of 2025. We estimate the PS5 Pro will account for around 10% of the PS5’s lifetime sales, pushing it over 10 million units.

Sony’s focus on increasing margins through high-end hardware, digital content and premium services reflects broader industry trends. Overall, we saw rising subscription prices, digital-only game releases, and a lack of hardware price declines, indicating a focus on ARPU maximization in a console market where platform holders are no longer seeing large install base growth. Sony is positioning the PS5 Pro as a premium product to drive hardware profitability while strengthening its position as a leading console brand.

In fact, we believe one of the reasons Nintendo isn’t launching its next-gen console in 2023 or 2024 is because it wants to ensure it can launch at a competitive price without sacrificing its traditional hardware profit margins. Other reasons include the need for a strong software lineup from day one and that the Switch has advantages over previous Nintendo consoles.

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