Sony losing mad loot on each PS3

We all knew Sony was dropping a fair bit of cash on each PS3 sold, but we suppose we got a bit too hung up on the resultant pricetags -- the notorious $499 and $599 SKUs -- to give the actual losses much of a thought. Well, worry not Sony, iSuppli's got your back. Turns out Sony will be losing change to the tune of $241.35 for every "premium" (WiFi and 60GB HDD) console, and a whoppin' $306.85 for the bargain-basement 20 gigger. In comparison, Microsoft loses $75.70 per 360 it sells, while Nintendo is laughing all the way to the bank with a profit per Wii sold. Just in case you missed it the first time around, or fell off your chair and forgot what you were reading about: Sony will lose the equivalent (or more) to the retail price of a competing console every time a cash register rings up a PS3 sale this holiday. We suppose it's for the best, then, that Sony won't have a whole lot of 'em to hand out, since we're sure Sony's own costs will start to drop as production really ramps up next year. Be sure to peep the read link for a full breakdown of the costs.

UPDATE: Our bad, Microsoft actually makes $75.70 per 360 sold, as opposed to the $71 they were losing last year at launch.

[Bob @ Nov 16th 2006 5:01PM]

I think the guy with 100 PS3s at launch should be nice and send Sony a check for $30k.

[Maff @ Nov 16th 2006 5:01PM]

Chicken Peas, keep to the point, added bacon scrambled eggs?

[KL @ Nov 16th 2006 5:02PM]

Sony should just charge $1500+ for the initial batch consoles. This would net them a small profit and discourage greedy ebaying because the profit margin would be smaller.

[tekdroid @ Nov 16th 2006 5:50PM]

...and give them huge image problems as an overpriced console to the rest of the population.

That said, I don't think any third party can get into the financial aspects of any deals Sony have with suppliers. It's all speculation.

[Todd @ Nov 16th 2006 5:03PM]

( voice of Steve Ballmer imitating Nelson Muntz from the Simpsons ) HA! HA!

[Christ Thomas @ Nov 16th 2006 5:04PM]

Insane. Check out these people that were camping out for the PS3 at our local Best Buy. http://www.youtube.com/watch?v=C81MrdLG4Is

[mmmatches @ Nov 16th 2006 5:09PM]

According to Ars Technica, Microsoft is now MAKING $75 on the $400 Xbox 360's, not losing it:

http://arstechnica.com/news.ars/post/20061116-8239.html

[MarxMarvelous37 @ Nov 16th 2006 5:39PM]

Interesting. I thought they were closer to break even from statements made after their latest earnings report (the $75 loss listed in the article is definitely outdated info though). Maybe they were taking marketing and other costs into account.

Either way, MS seems to be in a pretty good position (as does Nintendo) to actually make money this generation. It seems Sony will have a hard time making up that deficit without dominating like they did last gen (still possible but seems unlikely).

[Loban @ Nov 16th 2006 5:10PM]

Sony doesn't care how much they lose on each console. The only reason for the PS3 is to get a blu-ray player into as many homes as possible so they can win the media format war. If they can win the format war, losing any amount of money on each PS3 is worth it. The PS3 is a trojan horse for the blu-ray format. They tried a similar thing with the PSP and UMD died quickly and painfully.

[brendan Sheehan jnr @ Nov 16th 2006 6:50PM]

They may have invented Blu-Ray, but that no reason not to admit that it's a superior format. The fact that the disks will eventually be capable of holding over 200GB each, the fact that they will play PS1, PS2, CD, DVD and BD is something very very good indeed. Now if the games aren't up to par the main blame is in the developers hands, cause at those data rates they can let their imagnation run wild. That and Blu Ray has better surround sound fidelity.

[Matt B @ Nov 16th 2006 5:18PM]

That doesn't really make sense . . . $500 cost, and they're losing $300 on it? So it costs at least $800 to make and distribute. They're not making any profit on it (which they aren't if they're taking a loss) which means that it should cost $1,000 after margin? Bullshit. Those numbers are just wrong.

[ruinedsucks @ Nov 18th 2006 4:23AM]

And a plain-jane bluray player costs how much?

[Jason @ Nov 16th 2006 5:19PM]

Why doesn't Nintendo really show the love for the consumer and sell the console for $0 profit???

[Chris @ Nov 16th 2006 7:27PM]

"Why doesn't Nintendo really show the love for the consumer and sell the console for $0 profit???"

I'll give you the benefit of the doubt that you were kidding.

[Seb @ Dec 12th 2006 4:35PM]

Last I heard, Nintendo isn't a charity.

[Matt B @ Nov 16th 2006 5:25PM]

Yeah, after taking a close look at their math at iSuppli, this can't possibly include economies of scale:
20GB SATA Hard Drive Seagate $43.00

I doubt Sony is paying retail for overstock, unmarketable 20GB SATA HDs.
http://froogle.google.com/froogle?hl=en&q=20GB%20SATA%20Hard%20Drive&btnG=Google+Search&ie=UTF-8&oe=UTF-8&sa=N&tab=wf

I say that's a faulty analysis.

[Drew @ Nov 16th 2006 5:29PM]

Wow, that BestBuy in TN was maybe 0.5miles from an apartment I lived in last year. I couldn't imagine being out there in winter TN weather - rain that turns into ice at night. Ugh.

[Cousin @ Nov 16th 2006 5:34PM]

@ jason

Nintendo shows love for the consumer by making a console that costs $250 instead of $600 regardless of how much profit they make. Selling at a loss has nothing to do with Sony caring about the consumer, it has to do with them knowing they could never sell an $850 system and maintain market share.

[Ben @ Nov 16th 2006 5:39PM]

Hey, just a thought: anyone remember what engadget was like before the Zune and PS3?

Yeah, me either.

I can't wait for it to launch, and the sell for thousands, and then for the hype to die off, so engadget can report on the important things, like USB thumb drives, and gadgets for Korea that are useless.

[Cody @ Nov 16th 2006 5:47PM]

Shouldn't it also be taken into account all the R&D put into the Wii?

[Phil @ Nov 17th 2006 11:09AM]

R&D never gets factored into manufacturing cost. There's a seperate budget allocation for each sector.

[Octavus @ Nov 16th 2006 5:53PM]

They just compute the cost of producing an individual unit, not any cost that is distributed to all the units.

[glacia00 @ Nov 16th 2006 6:07PM]

It doesn't say if this is a BOM or yielded cost. In other words is it a straight breakdown of the cost of parts on a Bill of Materials or does it take into account the reality of manufacturing failures.

If this is a BOM cost the real yielded cost will be higher. Some of the ammounts seem a bit high so this may be yielded cost.

[Steve @ Nov 16th 2006 6:11PM]

Uh, guys, you might want to read the release from iSuppli with regards to the 360 numbers. They state that the 360 is actually costing $75.70 LESS than the retail price of $399, so MS looks like they should be pretty close to breaking even, possibly even making a profit, on materials at least. Regradless of the accuracy of the figures presented here, if they used the same methods for calculating both costs, then MS do seem to have taken full advantage of the extra year and are in a MUCH better cost position than Sony right now.

[glacia00 @ Nov 16th 2006 6:13PM]

"Hey, just a thought: anyone remember what engadget was like before the Zune and PS3?"

Sure, a new Apple rumor every 5 minutes and sushi shaped USB flash drives.

[MrPieGuy @ Nov 16th 2006 6:14PM]

Might need to read the isuppli article again... MS is now MAKING 75 per console.... :)

[brownie monstahs @ Nov 16th 2006 6:14PM]

sushi shaped USB flash drives

hahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahaha

[James @ Nov 16th 2006 6:27PM]

I keep wondering when big companies like Sony will figure out Econ 101 and get the laws of supply and demand down. You might take some flack from the media if you launch the PS3 at, say, $1200 per console, but that seems to be about where Ebay has settled on the actual *value* of one, at least for the first few months.

If they charged that much, a) you wouldn't have retards freezing their asses off in front of Best Buy for a week; b) Ebay wouldn't be in the position of trying to keep its customers from spending two grand on somebody's preorder that *might* get them a PS3 before Christmas; c) the whole damn blogosphere wouldn't waste 6 out of every 10 articles on "Will they? Won't they?" horseshit. They could price each succesive shipment $100 lower until it reaches the break-even point, turn a profit, and still sell them as fast as they can make them for at least 6 months. The current system is pretty much the same as playing the lottery -- I wonder if Amazon's web servers actually caught fire during the 2.5 minutes they had PS3s in stock? -- but it doesn't have to be.

[Hugh J. Disappointment @ Nov 16th 2006 7:42PM]

Oh boy, the thought of a huge piece of metallic crap polluting my living room is so enticing. And it even has a Blu-Ray player! What's Blu-Ray, you say? It must be one of those high-density whatchamacallits that may or may not win some sort of balls-to-the-wall format war. So enticing! And you say it can play games as good as the ones my laptop could handle one year ago?! And it can play MUSIC and VIDEO! That's so incredibly fine-and-dandy that I think I will rush right out and buy one now! You can't find them anywhere? What a shame. I guess I'll have to wait for the bullsh!t dust to settle on the BS-DVD/Gay-Ray battle before I buy something that will be a million times the capacity of my e-SATA hard drive that costs less. Boo-hoo.

[boynamedsue @ Nov 16th 2006 7:57PM]

Sony. the company that:

1. Installed rootkits on peoples computers that resulted in damage to peoples computers.
2. Actually STOLE code to make a rootkit that protected their own property
3. Told customers they shouldn't care because they don't even know what a root kit is.
4. Patented technology so they could bind games to consoles, so that if implimented, wouldn't let people lend their games. (they haven't used it yet.. but what a bitch ass thing to patent.)
5. Had an ad campaign with a white person assaulting a black person with the slogan "White is coming."
6. Released useless firmware upgrade after firmware upgrade for the psp, that added no functions, and took away some.
7. Forced those upgrades.
8. Cut europe and austrailia from the ps3 launch and told them that "they don't mind waiting"
9. Killed small import companys who's only crime was MAKING SONY MONEY, by SELLING SONY PRODUCTS, to those european and australlian fanboys that "Didn't mind waiting" for games.
10. Pushed back their reader product a dozen times, and when it finally came out there was a whopping under 500 actual units ready for launch.
11. Took the rumble off of the ps3 controllers to "Save fans money" thank you for saving me 5 bucks on a 600 dollar console.

not a week go's by that i don't hear something retarded come out of a sony execs mouth. The company is run by asshats that hate their customers.

[Technician.Ken @ Nov 16th 2006 8:12PM]

2nd Generation hardware should be much less expensive for Sony to produce. Currently, Sony has actual Graphics Synthesizer and Emotion Engine hardware in the PS3 to be backwards compatible. Once the kinks with software emulation are worked out, they'll no longer need to need that hardware in the machines. The second big ticket item is the blue diode laser in the BR drive. That will quickly drop in price.

Though I don't see the cost of the XDR memory coming down by much within the first 18 months, EoS should help to lower per unit cost of producing the RSX and CELL BE chips. IBM/SONY may also move to smaller feature size for said chips, which will drastically reduce cost.

I don't see the PS3 being a money loser for very long.

[Bob @ Nov 16th 2006 8:53PM]

Yeah that video was of the Best Buy in Johnson City, TN.

I used to live there, boy am I glad I got out of that S***hole.

-Bob
Go Hokies, GOBBLE GOBBLE

[Oddmanout @ Nov 16th 2006 10:31PM]

That is hilarious. Just think about it. Nintendo could literally GIVE THE WII CONSOLE AWAY FOR FREE and still have a competative advantage over the PS3.

That's either very gutsy, or just plain insane on Sony's part.

Time will tell...

[Sam @ Nov 17th 2006 2:36AM]

All I can say is, Who gave that little man a HUGE PS3???

[crescentdavid @ Nov 17th 2006 3:55AM]

I know it's hard for fanboys to admit it, but sony's going down. They can kiss the ps3 generation 1 and 2 goodbye. Too late for too much. Maybe in 3 or 4 years.

They choked, they got scared by xbox, overreached and blew it.

[Bharat Gupta @ Nov 17th 2006 5:39AM]

Hi,

Agreed that Sony will loose $x per console till it reaches threshold level in mass production post which the manufacturing cost will start falling.

But till then, i am sure Sony will compensate loss through profit generated by Software (PS3 games).

A person would buy atleast 2-3 games in a span of first 2-3 months.

The profit generated through same should compensate for loss.
Not to mention royalty generated by accessories certified for Sony PS3.

I am sure, every company has its route to profit all figured out :-)

Regards,

Bharat

[Karl Viklund @ Nov 17th 2006 7:07AM]

Hahahaha it's sooooooooooooooooooooooooooo BIG!!!

[OOkladek @ Nov 17th 2006 7:18AM]

I may be stupid and I read the all thing on iSuppli's website wrong but as far as I understand Microsoft in not losing 75$ on every system, but the opposite, they are making a profit of every system they sell of 75$

Editors of engaged take note of this you might have the numbers wrong there.

[ruben @ Nov 18th 2006 12:03AM]

my big questions is if that is even remotely true that they are losing money on each ps3 they sell which i hugely doubt then why the heck would they even be selling them>? doesnt make sense if
it is between 200-300 bucks they lose per sale of ps3
i dont think this makes sense.
some people can will think oh sony is making profit in their accessories and shyt but guess what not the average gamer at least not most people will spend 300 bucks on accessoires this is totally false.
if sony is losing money it is not in this range i doubt they even lose anything.
they prolly get huge discounts for buying their equipment in bulk first off, it doesnt make sense to sell something and lose money, sony is not that dumb(atleast i hope)
from the looks of it I feel that the PS 3 will be a make or break of sony,look at the whole battery scandals, look at their marketshare of tvs and such it has gone down in the past couple of years this is a huge gamble for them
i do not play consoles much i am a pc person and will stay one, cause at the end of the day all these new consoles are derived from pc"s thats why Pc's will alaways be better regardless of specs and such
i fully support the Wii and xbox 360 the ps3 itself is a victim of those who make it.

[berri @ Nov 18th 2006 12:40AM]

Poor Sony. Not. They know EXACTLY what they are doing. It's all marketing.

[robby2009 @ Dec 17th 2006 8:06PM]

This is great news in my eyes. I despise Sony, and am therefore very happy that they are losing so much money. MS and N OWN Sony.

[Mark M @ Jan 5th 2007 7:43AM]

This is normal procedure in the games industry. The theory is that you can make up for the loss on hardware when customers buy software (and in this case, even Blu-Ray video media). However, Sony here seems to have forgotten that this is just a theory that may not work every time.
They want Blu-ray, PSP integration & Cell to succeed but are doing the mistake of putting them in one (PS3) basket all at one at a high price. It's a form of gambling that is insan in business terms, no matter how many brand loyal customers you may have. I wonder how many of those (apparently) loyal fans are willing to buy an expensive machine on which software is more expensive than that of the competition. Not until some half genuis figures out a way to play backups, in which case Sony won't be selling those 9 games/unit needed to breakeven.
Traders out there already expect Sony Shares to fall.

[dubplate23 @ Jul 4th 2007 10:30AM]

Mark M is right (above),sony will

reap the awards eventually from the massive profits they make on their games and software. They also need the ps3 out there in everyhome, thats when the real game begins.

[Averre @ Oct 18th 2007 12:20AM]

They will not 'reap the rewards' of anything, do the math.

Right now as of OCT of 2007 every 20gb PS3 is losing $306.85 per unit

Hardware cost: $808.85

Selling price: $499.00

Heavenly Sword is considered another loss by the gaming board, although it received fair reviews it was bashed by both gamers and critics alike for being way too short, some gamers have even went so far as to trade in the PS3 because of it.

Developers of today and not the same we had 20 years ago, there able to pick and choose where to go, many have already stated going multi-platform (Square-Enix for example).

So when the smoke clears, what do you have? an overpriced piece of hardware losing money faster than it can bring it in.

[Bhrama @ Jan 8th 2008 2:52PM]

The Future is Blu and Sony knows this.

Give it another year and we'll see what's up.