Getting a PlayStation 5 or Xbox Series X/S is a herculean task. With both consoles selling out within minutes of restocking, it’s been very difficult for the average consumer to get their hands on one.
Why aren’t there enough consoles to match such a ravenous demand? Well, the answer is more complex than you may expect.
Manufacturing the PlayStation 5 and Xbox Series X/S is expensive and complicated
Out of all the questions surrounding this topic, this one is the biggest elephant in the room. Clearly, tons of people are trying to throw money at Sony and Microsoft for a new console. So why don’t they simply make more?
The short answer is they can’t. Manufacturing consoles is a very complex and expensive process. In fact, console makers always lose money on consoles.
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Assembling a console requires hardware parts from various third-party factories that are also manufacturing items for other electronics giants such as Apple, Nvidia and more.
The actual production and assembly also take a long time because consoles are large, intricate machines. If an electronics company overestimates demand, it risks bleeding lots of money on idle supply lines and warehousing fees.
Basically, consoles use elaborate components, take a long time to make and are very expensive to build. With all this in mind, I’ll outline a scenario.
Let’s say you’re a game company releasing a hot new console called the KnowStation Z. It costs $400 to build one and you want to have 5 million units available for the holiday season. Just building those units has already cost you $2 billion.
This is an extreme simplification, of course. We haven’t taken shipping and storage costs into account. Nor have we accounted for a lack of components — maybe Microsoft bought up all the RAM you needed from some vendors so you need to cut back on your KnowStation Z production.
But you get the point. Making consoles involves thousands of moving parts, while the console makers weigh demand against cost.
COVID-19 has created an unprecedented demand for video games
The pandemic has turned everyone into a gamer. World of Warcraft: Shadowlands, which launched on Nov. 23, became the fastest-selling PC game of all time. Cyberpunk broke that record a month later with 8 million pre-orders across all platforms.
With restaurants shut down, vacations canceled and most outdoor recreation gone, there’s been a massive appetite for video games. Quarantine has inspired lapsed gamers to pick up the hobby again while others are trying it for the first time. Everyone wants a new console or a gaming PC.
But fabrication plants have also slowed production in accordance with safety measures against COVID-19. This means that plants are producing fewer components (for good reason) which also means fewer consoles are being built.
In the meantime, the demand has increased.
Resale culture has greatly increased scalping
Resale culture was already growing, but now under the pandemic, it’s exploding. Fashion merchandise such as clothing and sneakers (sneakerheads, check out The Flip!) are the most well-known resale markets.
But that mindset of buying a high-commodity item (sometimes in bulk) purely with the intent to sell it later at a higher value has also bled into electronics. Scalpers have always been a problem with major console releases, but in 2020, it was particularly bad.
One scalping group, CrepChiefNotify, bragged about hoarding thousands of PS5s on launch day.
Congratulations to our members
In less than 24 hours of the release of the PS5 and our members have secured over 2,500 consoles this morning.
Stop missing out, reselling isn’t going away so jump in fast and maximise your profits. pic.twitter.com/WUTBFWNHfE
— CrepChiefNotify (@CrepChiefNotify) November 20, 2020
While a source within the organization told Video Games Chronicles that it’s exaggerating its profits, it’s true that scalping has become a huge problem. It’s entirely possible for dedicated scalpers to get a bunch of PS5s and XBXes, especially since few retailers had security measures.
Botting has become a massive problem in the past few months. These automated programs scour retail sites and automatically buy hot commodity items such as the PlayStation 5 as soon as the stock renews. They can be run 24/7 and they obviously do all of this much faster than a human being.
Retailer response to this has been mixed. Botting is not illegal (yet) and high-end consoles are not essential items.
Some vendors have been canceling pre-orders from suspected scalpers while others have implemented a queue system. Others can’t be bothered to even add a CAPTCHA filter. After all, a sale is a sale, whether it’s made by a scalper or a customer.
The console makers and retailers are at fault as well
The lack of PlayStation 5 and Xbox Series X/S stock is understandable. I mean, what company could’ve possibly predicted a worldwide pandemic shattering the global economy and imposing a ubiquitous quarantine?
But they all could be taking a much more proactive stance against scalpers. Console makers and distributors are experiencing a deluge of initial sales at the expense of long-term profits and customer loyalty.
For example, Sony might be sitting pretty right now with PS5s flying off shelves, in no small part due to scalpers. However, many gamers who would’ve happily purchased a PS5 have decided to stick with their PS4 for now.
Sony currently stands to lose money because so many of the PS5s they sold aren’t being used, which also means the company is losing out on software sales. A lot of those PS5s are sitting in some scalper’s garage rather than being used by genuine consumers who would be buying PS5 games.
And the truth is, some companies are just better at meeting demand than others. Apple products are both difficult to make and wildly popular, but shortages are a rarity. This is because Apple boasts one of the best supply chains in the world.
Strap in — the shortages aren’t ending any time soon
The console drought is expected to go on for a while. Optimistic estimates project the PlayStation 5 and Xbox Series X/S shortages to end around April 2021.
If you’re really hankering for a new console, check out our guide on how and where to get a PlayStation 5. It has tips and sources used by average consumers who managed to secure the coveted console before Christmas without the use of bots. Although this guide is specifically on how to get a PS5, it can easily be applied for the Xbox Series X/S as well.
Here’s to hoping that the pandemic and the console shortages end soon. Take care of yourselves and stay safe out there.
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