This time next year, you might be unwrapping your brand new PlayStation 5 or Xbox Series X consoles and test out the brand new games made for it before you start your Christmas day. Or you’ll get one for some of the kids in your family. Both gaming rigs will hit stores at some point in November 2020 or early December at the latest, after an undetermined period of preorders. But one of your New Year’s resolutions this year should be to be ready to pay more money for the PS5 or new Xbox than the current models. We still expect both consoles to be affordable, but they won’t, and can’t be cheaper than the PS4 Pro and Xbox One X they’re supposed to replace. Sony and Microsoft might not be ready to tell us what their upcoming consoles will cost, but unofficial estimates already tell us they can’t match current prices.

Niki Partners Senior Analyst Daniel Ahmad explained on Twitter (via ComicBook), that the PS5 and new Xbox can’t launch sub $400 because the bill of materials (BOM) for the known specs is much higher than that.

Taking a loss isn't unusual. It's been the case with many previous generation consoles. Console manufacturers have always used the razer blade model. Even the PS4 hardware was sold at a loss initially, but became profitable in early 2014, a few months after launch. — Daniel Ahmad (@ZhugeEX) December 19, 2019

It’s no secret that both consoles will sport custom CPU and GPU parts made by ADM, GDDR6 RAM, and NVMe solid-state drives (SSD), which would turn them into powerful gaming computers, capable of delivering up to 8K gaming, ray tracing, and kill game loading times.

Those components, however, are pricey, and there’s probably no way for either Sony or Microsoft to sell their new consoles for under $400. Both companies are expected to take a loss in the first year, as it happened with previous models, but that loss can’t be too significant.

My point is the build cost of these next gen consoles will be higher, meaning a sub $400 retail price would lead to a heavy loss per unit sold. I don't think it'll be as bad as PS3, which cost $800 to build at launch (Sold for $500). But it's something to keep in mind. — Daniel Ahmad (@ZhugeEX) December 19, 2019

The same Ahmad said in the same thread that the BOM and manufacturing costs for a Series X console could come in at $460 to $520, which isn’t too bad. This is what Microsoft would pay to make each console, but it’s an estimate from an analyst, which could see changes in the near future.

My point is the build cost of these next gen consoles will be higher, meaning a sub $400 retail price would lead to a heavy loss per unit sold. I don't think it'll be as bad as PS3, which cost $800 to build at launch (Sold for $500). But it's something to keep in mind. — Daniel Ahmad (@ZhugeEX) December 19, 2019

Even so, a $499 price tag for either the PS5 or the new Xbox would make plenty of sense, especially if Ahmad’s guess above is accurate. Both Sony and Microsoft would take initial losses on their machines, but that $499 price would still be appealing.

Some leaks said the PS5 would cost $499, but Sony is yet to reveal the price of the console. The company did say it’s looking to make the new PlayStation as affordable as possible, and that it plans to convince as many PS4 owners to upgrade to the new model as fast as possible. Those might turn out to be unreasonable goals if the PS5 should be a lot more expensive than that.