Report: PS3 to sell for $399, cost $494 to make

Scruff

from http://www.gamespot.com/news/2005/06/28/news_6128295.html

According to the latest issue of Japanese magazine Toyo Keizai, Merrill Lynch Japan Securities has recently calculated an analysis that the production of a single PlayStation 3 console will cost Sony approximately 54,000 yen to make ($494), as of its initial release in 2006.

Merrill Lynch Japan estimates that the machine's main components--namely its Cell chip, RSX, and BD-ROM drive--will cost about 11,000 yen ($101) each. After adding the other electronics that will be used in the PS3, the machine's production cost goes up to 54,000 yen.

Given that Sony's PS3 will face stiff competition from Microsoft's Xbox 360, the chances that Sony will release its console at its production cost is slim. Under the assumption that the Xbox 360 is expected to sell at around $299, Merrill Lynch Japan predicts that Sony will sell each PS3 at the price of 44,800 yen ($410) in Japan and $399 in America. That would mean Sony would suffer a loss of more than 130 billion yen ($1.18 billion) during the first year of the PS3's release.

bit pricey alright. too pricy for the market to bear??

steviec

Isn't that roughly the same price as the PS2 launched for?

Citizen_Erased

Really , Really gotta larf
Why would they do that though , surely they don't own enough of other electronic markets to do that ? Are they getting extra income from elsewhere? eg game producers , developers?

Chalk

over the lifespan of a console, hardware production costs go down, rapidly.
so while 399 is a 100 loss now,
in 3 years it would be a 299 profit, at least.

so they can reduce the price and absorb any early lossses

steviec

Chalk wrote:

over the lifespan of a console, hardware production costs go down, rapidly.
so while 399 is a 100 loss now,
in 3 years it would be a 299 profit, at least.

so they can reduce the price and absorb any early lossses

And of course they need to sell hardware so they can make big profits on software in the long run.

Citizen_Erased

Yeah but they have to drop the price of the console aswell .

Ciaran500

A $1 billion dollar loss would wipe out their profits for the entire company in 2004 (videogames,entertainment,electronics etc etc). With nearly 2 billion already gone into the cell and the PSP (assumably) selling under cost this is a huge hit for Sony to take, even one the size of Sony.

Tusky

Im sure they know what they are doing :P

steviec

Citizen_Erased wrote:

Yeah but they have to drop the price of the console aswell .

As costs come down they bring prices down aswell. So at the start it might cost 500 and sell for 400 but at the end it might cost 150 and sell for 200. They will certainly reduce the loss on each console and maybe turn a profit. But it's still not nearly as important as software sales. Microsoft's strategy with the x-box has always involved selling the machine at a loss from start to finish. Although that was more to do with gaining recognition before moving to the next gen than simply getting software sales. They could live with an overall(HW + SW) loss to get themselves in a good position. Games is one of Sony's most profitable areas though so they really can't afford that in the long term.

Ciaran500

Don't underestimate the cockyness of Ken

""Our ideal [for the PS3] is for consumers to think to themselves, 'OK, I'll work more hours and buy it.' We want people to feel that they want it, no matter what.""

cregser

I want it. Bit not for €400. My IR£400 PS2 had that disc read error problem. The cheaper ones are trouble free...

JohnMorrissey

Xbox also had halo to rely on =D

danniemcq

most cosoles sell at a loss. according to the interview with Time that he did Bill Gates claimed that the Xbox hasn't been a financial sucess at all and no profit has been made (not actual quote relying on memory here) it was used as a way to get into the market before destroying all with the 360. besides most people buy a few games for their console (otherwise what is the point in buying one) so they get money back that way 2

Scruff

true but i know i the only new game i bought for the xbox in the last year has been halo 2. All the other games i bought were preowned ones. Microsoft got no money from me buying those so no loss recouped. It doesnt matter how big a company you are, a $1 billion loss in a year is gigantic and as Ciaran500 said, they also have the R&D investment to recoup.

i dunno, i think we might be seeing a reversal of roles here. Its all well and good adult gaming enthuasists going and buying it at that price but what if you are a parent and your kid is screaming for a next gen console for birthday\christmas are ye going to fork out the €300 for the 360 or €400 for the ps3?? Especially parents that arent flush with cash and dont necessarily know\care what the difference is.

grimloch

well 400 is less than I thought it would be, cheaper than the PS2 at launch at any rate. Although 400 plus the cost of the revolution will leave my pockets very empty...

This could be a bad loss as they will have to suffer the original and then keep dropping the price of the console to keep it competitive.

flogen

If estimates are to be believed, the PS3 will launch 6 months after the xbox 360 and €100 dearer, it sounds very PSPish to me!!
It wouldnt surprise me if the 360 drops in price by then too, or some kick ass bundle (involving Halo 3, of course) is out by Spring 05, that is the main reason for the 360 launching early, so it can always be in a position to undercut the competition. Saying that, like the PSP, the PS3 will sell extremely well no matter when or how much it sells for.

MrPinK

I really don't think Sony are just gonna take a $1.18 Billion loss on the chin. But the numbers are just estimates at this stage. I've seen other analysists estimate the cell processor costs as low as $30 a chip, a big difference to the $101 estimate in this article. They are all estimates though, so we'll just have to wait and see.

Scruff wrote:

Its all well and good adult gaming enthuasists going and buying it at that price but what if you are a parent and your kid is screaming for a next gen console for birthday\christmas are ye going to fork out the €300 for the 360 or €400 for the ps3?? Especially parents that arent flush with cash and dont necessarily know\care what the difference is.

That wouldn't really be a big concern for them. The real money isn't from parents buying for their kids anymore. They've now got a huge market of adult gamers with plenty of disposable cash for them to target. The average age of a PS2 owner is 28.

flogen

Perhaps each of the parts would cost $100 to produce each, but be far less than that on a mass-production scale, but MrPink is right, it's all guess-work and estimates until Sony come out with an official launch price.

evad_lhorg

if they can make a loss on the console they are clearly counting on the games selling a lot cause thats where the companies make money anyway. the rake it in on games.

KdjaCL

its gonna be all about the launch titles , he who throw mostest money at rockstar will get the early ground.


kdjac

Kristok

i personally wouldnt be bothered buying either of them unless they had some amazing games, 3 or 400 for a console with no good games whats the point.

grimloch

They might pull another one of those "you get the console, one controller and a few wires and thats it" I spent 50 quid straight off after buying the PS2 getting a memory card and a controller and the like. May try the same again.

flogen

well sony have yet to say if a HD will come with the machine, I think they'd be fools not to, one of the best parts of the XB is the HD (well, one of the best extras on top of performance)

cregser

flogen wrote:

well sony have yet to say if a HD will come with the machine, I think they'd be fools not to, one of the best parts of the XB is the HD (well, one of the best extras on top of performance)

For a second there I thought you meant MS will be giving you a free HDTV with the console. That would be sweet! Getting my hard disks and high definitions mixed up there.

Didn't MS say that the HDD is optional for the 360 aswell?

iregk

MS have said something on the line that it will be an option. But more stories and info say that it will ship with a 20gig, but upgrades in a plug and play fashion will be available over the counter. Same as buying an extra controller or something.

Ciaran500

On the tomshardware article that was out after the MTV show it said it will come with a 20gb HDD with the option to upgrade.

skywalker

danniemcq wrote:

most cosoles sell at a loss. according to the interview with Time that he did Bill Gates claimed that the Xbox hasn't been a financial sucess at all and no profit has been made (not actual quote relying on memory here) it was used as a way to get into the market before destroying all with the 360. besides most people buy a few games for their console (otherwise what is the point in buying one) so they get money back that way 2

Ive read several places that MS makes all its money through the windows/office divisions. Everything else they do is funded by those.

flogen wrote:

If estimates are to be believed, the PS3 will launch 6 months after the xbox 360 and €100 dearer, it sounds very PSPish to me!!
It wouldnt surprise me if the 360 drops in price by then too, or some kick ass bundle (involving Halo 3, of course) is out by Spring 05, that is the main reason for the 360 launching early, so it can always be in a position to undercut the competition. Saying that, like the PSP, the PS3 will sell extremely well no matter when or how much it sells for.

I was thinking along the same lines. xbox 360 could easily drop 50-100 € off the price of their machine (& have a lot more games on the shelves by then). Would put Sony on the back foot from the get go.

Peteee

Theres no way the cell and the blu-ray drive are costing 100 a piece.

First of all, Sony are making both of these in house. (I think Sony own one of the plants that are fabbing the Cell)

Chips do not cost 100 euro a piece, they cost a few dollars each. The rest is R&D, which, AFAIK sony have already written off (Correct me if i'm wrong)

The blu-ray drive, is basically a DVD-Drive, with a blue-laser (simplification, yes, but basically thats it). DVD drives cost all of 20 euro to buy, Therefore they cost a pittance to manufacture (especially to someone like sony, who can source all components in house, and dosent ahve to pay licensing costs, since it owns the IP, or if it does pay licensing costs, some of that goes straight back to themselves)

Secondly Sony want blu-ray to 'get out there' so they can sell both proper blu-ray drives (making money on those), release movies on blu-ray disc through Columbia-Tristar and they'll also get money off every single disc and player/recorder sold (due to being the principle inventor of the technology)

If blu-ray does take off, it's worth billions to sony, and they _may_ be willing to take a loss. But as i pointed out above, i dont think the components are costing sony as much as the article ahs stated

steviec

Peteee wrote:

If blu-ray does take off, it's worth billions to sony, and they _may_ be willing to take a loss. But as i pointed out above, i dont think the components are costing sony as much as the article ahs stated

I would be inclined to agree with you, but the article is quoting Merrill Lynch and I doubt they pulled the figures out of nowhere without doing proper research.

The blu-ray point makes sense though, I assume they'd get royalties for all blu-ray movies sold so if it becomes the number one format it would be worth a lot to them.

flogen

without straying too much, I don't think blu ray will do very well, it's too soon for people to buy into a new format, especially one that doesnt offer much of an advance to the average user. The only plus I see is being able to fit whole TV series on one disc, or all the LOTR extended editions on one rather than 2 discs. If anything, DVD HD will do better because it's manufactured the same as regular DVDs and so will cost companies less to switch to.
On that topic, I don't think blu ray drives are all that similar to DVD drives, the architechture of the disc is very different anyway, I'd imagine the drives will be the single most expensive thing in the PS3 at first, if they don't include a HD.

1huge1

way to pricy for me and the ps3 really didnt impress me to much anyway
maybe in a few years when it gets cheap