In all the previous generations, the price of the components needed to manufacture a console got cheaper over time, eventually allowing them to end selling the console at a profit, or giving them room to apply price cuts.
This generation the opposite happened: the components got more and more expensive due to huge demand of covid (may people bought PCs/laptops/tablets/etc) and because other industries required a shit ton of chips more than usual: electronic currency farming, electronic vehicles, servers for AI etc. The fuel pricing also increased, making shipments more expensive. And there's also a big global inflation, which also increases prices in general.
So initially things were as usual: had great launch window sales to the point they were able to sell some SKUs at profit, but costs unusually started to grow and grow to the point that the loses per hardware unit sold were too high and they had to increase prices and do some actions (in a revision they changed some components to be able to use multiple providers and don't depend on a single one) to compensate it and keep it at decent levels. Not only happened to Sony, but almost everyone even beyond consoles or gaming.
Totoki (Sony Chief of Finantials Operations) explained this some time ago and said that looking forward will be difficult to reduce these costs. I assume not only because of the costs themselves, but because seems that we'll continue with big inflation in upcoming years, and the USA vs China competition may affect their business in the future. So to assuming that hardware will provide them loses they can avoid, he wants to maximize the profit in all the other areas to compensate loses from hardware: console game, addons and accesories sold for PS, PS+ subscriptions, SIE revenue outside PS, etc.
No, it's normal on this point of a console sales cycle: the sales of all consoles make a curve and after their peak -which all 3 consoles of this gen already passed- their yearly sales normally decrease every year.
As we seen in some graph of this thread, launch aligned it's performing almost at the same level than their best selling consoles ever, PS2 and PS4:
With the difference that PS5 had the chip shortages issues and has not been able to apply the price cuts that all the previous consoles had at this point, and instead had to increase prices.
But now Sony gets more money than ever from each console sold not only because sells the console more expensive: but because their users spend more money than ever on games (game sales + addons), game subs and accesories etc. Players also spend more time there (not only in PS5, many still are on PS4), which leads to think that in the future these users will continue there spending money and at the end of the generation will have spent way more money than in the previous one.
In fact this fiscal year the generation will become the top grossing one for them, and already generated more profit than all the previous ones combined:
They are more than fine. Obviously if would be great to find some solution that would allow them to price cut the console at least in some key European country without killing the profits, but as of now the priority for them is to maximize profit because costs and inflation very likely will continue rising the years ahead, and also because to have a gazillion superexpensive first party games under development is very risky, and it's impossible to avoid that from time to time some game will get cancelled or will tank.
Worldwide -and particularly western- economy seems that will struggle in following years, so it's time to focus on profitability and save money for the future just in case they need it.
