The
Times Online had a sit-down with Sony Computer Entertainment boss, Kaz Hirai, after the big Gamescom show last week in Cologne. You remember, the event that saw the official launch of the
PS3 Slim. The Q&A is an interesting read in whole, but the answer that stands out comes in response to a question about whether the lower-priced $299 PS3 Slim will be sold at a loss relative to its cost to manufacture. "Yes," was the quick answer from Kaz. That's a surprise for two reasons. First, the PS3 Slim benefits from more efficient
45-nm manufacturing processes used on its smaller, less power-hungry Cell processor. Also, just last month Sony's CFO told investors that manufacturing costs of the PS3 had dropped by "
about 70%, roughly speaking" -- that comes to about $240 based on original manufacturing
estimates of
$800 when the PS3 launched back in 2006. Regardless, a console being sold as a loss-leader is nothing new in the gaming industry and, as Kaz points out, will almost certainly be offset by looking at the PS3 as a platform that includes the hardware, software, peripherals, and services.
[Via
GamesIndustry.biz]
posted Aug 25th 2009 5:23AM
Sounds more like a PR stunt so people would think the $299 price point is an "awesome" deal since Sony is "loosing" money.
... oh and Sony will get most of their profit from the $25 vertical stand. :P
Small detail the writer forgets in about 4 years time the 800 usd production needs to be indexed so it would be closer to 900 to 950 usd nowadays. If you then reduce the costs by 70% you still endup at a production cost of 275 usd. Then add a bit of transportation, marketing and further R&D you still endup loosing money. But then Sony doesnt rely on the production cost but the licensing to be profitable. So sure.. they loose some money but if the product stays around as long as the other PS consoles did they still make some good money from it.
ACH!
Loose = Like change in my pocket. Think of the two O's being two coins.
Lose = I can't find it, I don't have it anymore. It LOST an O.
8-)
Yep PR BS unless they come up with the deets of actual costs .. It's always been the perfect sales pitch
MAYBE THESE IDIOTS AT SONY WOULDN'T BE LOSING MONEY IF THEY'D DISCONTINUE PS2 and HAVE BACKWARDS COMPATIBILITY IN THE SLIM PS3???
@Quantumphysics
Because ADDING back the Emotion engine chip would LOWER the price per PS3 cost? Nice argument - you're just whining.
The one thing that people neglect to understand, is the original $800 production cost number, was an estimate made by a 3rd party company (I believe iSuppi was the company who did the initial tear down), and never confirmed (nor denied) by Sony themselves. In other words, the original $800 number, was never the official production price of the PS3. Given the fact that early blu-ray units cost anywhere between $1500 and $2500, I think that it is now safe to assume that the original (secretly kept) build cost of the PS3 was much higher than the $800 estimate guessed at by iSuppli.
Considering the official news from Sony earlier this year, that they were able reduce the cost of PS3 development by 70%, and considering they are still losing money on the newest "slim" model of the console at $300 price tag, again we have further evidence that iSuppli's original estimate of $800 was off by quite a bit, and the original cost to manufacture was much higher.
Now, using the numbers that we know are officially quoted from Sony, and applying a little math, it is safe to guess that the original cost of build on the PS3 was somewhere over the $1000 mark. If the cost to build the PS3 Slim is 70% less than the cost to build the original PS3, and if at $299.99 Sony is still losing money on each PS3 unit sold, then the absolute minimum it cost Sony to manufacture the original PS3 units, is $1000.
The exact number may vary, but once you account for forex fluctuations over the past three years, plus factor in inflation, plus other monetary concerns caused by the current economic climate, then the cost of the original PS3 units in current USD, would be in excess of $1000 per unit. Making the PS3 beyond the shadow of any doubt, the most expensive game console ever. This would also better explain Sony's less than spectacular fiscal situation over the past four years.
I am sure that the console itself is close to break even - but the cost of maintaining the Store, Home, Life with Playstation, Internet portal/forums, related bandwidth charges, marketing, shipping, tariffs, firmware development, etc. - it ends up being a loss.
well its simple math, if theyre still losing money at $300 and reduced 70%, then that means it must have cost at LEAST $1,000 initially.
0.3x = 300
x = 1000
however, selling at a loss and not selling any sony titles means you arent gaining any money and the SCE division is still losing billions per year.
simple math again
sony + ps3 = sony fucked
"Losing," not "loosing."
Just sayin'.
perfect photo
Fair enough i guess, as he said they make it up in all the other junk like headsets, PSN downloads etc.
Does that include game licensing? i.e they pay Sony to have their game on the PS3 or is it the other way around? Sony pays them?
Also Blu-Ray licensing...
Maybe if they put the console in a case the shape of a panda and have you slip the cd's in its ass it might sell NOTTTTTTTTTTTTT!
Sony wake up and smell the coffee, no one wants your PS3
I do...
LOL!
The PS3 is the third fastest selling console in history. Only the PS2 and Wii have sold at a faster rate.
Let me guess you get your 'sales' news from vgchartz...
Man, you're so bias, you probably don't mention this but chances are your dying to get your hands on the new PS3 Slim atleast for the novelty.... admit it...halo and cod4 got you tired already
Many products are "loss leaders" in different industries. HP loses money every time they sell a cheap printer, but look at how much the ink costs. Same for the £50 games here in the UK.
HP doesn't sell printers at loss. And never did. This is an urban legend. Sometimes volume prices drop to ridiculous levels, but that how it always worked in PC market.
The problem with the losses is that they increase risk rating of Sony: different business units are not profitable individually - only if viewed together.
More complex investment scheme with higher risk rating - harder it is for Sony to find investors for future product development.
Well, at their size and volumes, for the time being it shouldn't be a problem. Though if Nintendo wises up (and this is a big 'if') and start competing with PS3 seriously, Sony's entertainment business might be in a trouble few years from now. Most of their profits would be spent on covering past PS3 losses, making them even less attractive to investors.
IOW, their '10 years plan' is easy bet. Though it was a classical PR B.S. in the beginning, it might become a nightmarish reality when they wouldn't have enough money to release a successor to PS3 in timely manner to remain competitive with MS and Nintendo.
Considering that this is the Sony, the situation is really looks stupid: with their combined coverage of media and entertainment industries, they were poised to be unchallenged first. Yet managed to screw up a big time.
@Dummy00001
You mean to tell me then they can build a all-in-one for $8.72 with all the cords and ink cartridges? http://www.samsclub.com/shopping/navigate.do?dest=5&item=400358
I work for Sam's Club and those printers are a 78.1% margin. They sell for 39.81.
o.O
Well, It must be at least very close to the $299 price point...
The worst gaming platform out there and the biggest money loser. Yo Sony, that is no way to run a business. No wonder those Japanese have been in a recession for the last two decades. So sorry.
ummmmmm the Japanese were doing fine until their BIGGEST exporting customer, The U.S., started having hard times....need more proof?? Toyota been around for over 50 years and Had it first LOSS last year!!!
" 'YO' Sony, that is no way to run a business"
I am thinking of ways to say "you cannot be serious man" in a manner that does this predicament justice, currently considering the way that famous Tennis Player used to.
I find it amazing that people consider the difference between $240 and the retail price of $299 the Sony mark up...
Most retail products have a mark up of at least 30% at every stage.
So, if Sony sold the PS3 as their estimated cost of $240 then
Sony to Distributor - 30% = $312
Distributor to Retail; 30% - $405
Retailer to customer - $527..
For the PS3 to have a retail price of $299 the price Sony is putting it into the distribution channel at would have to be about $140.
The other option is to deliver directly to the retail but even there there will be increased logistics costs.
Or everybody would have to be making less of a mark up on it.
Either way. If you want one it's $299. I'm into leaving the big corproates figure out the numbers that make the retail price...
I hate to break it to you, but your numbers are nowhere near the real breakdown. In fact I think the $240 estimated cost doesn't include the cost of the controller, A/V cable, USB cable, power cable, documentation, and the box that the whole shebang gets shipped with. I know a lot of the $800 and $900 estimates for the original launch units were only for the console itself. Once you include costs for manufacturing, packing and shipping you are well over the $300 retail price. And here's the real retail markup on game consoles (and a lot of lower-priced consumer electronics like DVD players, sadly): less than 10%. A store doesn't make money on the consoles themselves, they make it selling games, accessories, and protection plans. It's the razor/blade analogy again.
If you walk out of a store with just the console, the store at best breaks even. Honestly, they probably lost money due to shipping it to the store from their distribution center, their overhead costs (electricity, rent, etc.), and paying the poor sap who couldn't convince you to pony up for the insurance (which if bought with an early Xbox360 would have lost the company MORE money due to having to pay out for non-warranty repairs--which at the time was a measly 90 days).
reading through here alot of you do not make sense lol....
when a company says cost of production is down 70% they do mean from the original figure and not some inflation equation you (the poster) have equated.......
also to the guy who's calculating cost based on his analysis of the 30%mark up, well you just don't know what your talking about at all, i don't know where you get this " average percentage of mark up from hand to hand" but your way off as to how the system works.........
fastest selling console was not the ps3.......
Its production cost, not total cost, thats why there still "loosing money" on the console.......
to the guy thats building his own blu ray for under 300, ill guarantee it wont be as reliable nor produce as good of an image.....
Its a great console all around and for those you say they will never buy one bla bla bla, you either do not own a GOOD hdtv, so you don't appreciate a good player or you spend all your money on new bongs, so you cant afford one and therefore jealous
p.s... the ps3 is hackable
Seriously? An article like this and no image from the Tom Hanks classic "The Money Pit"? The scene where the that house breaks to the point that a turkey is fired from the oven still makes me laugh hysterically...
Those are for Xbox articles.
By their own statements Microsoft is up to 8 billion in losses on the two Xboxes.
Good ol' YouTube never lets me down, although I have no idea which language the subtitles are in.
http://www.youtube.com/watch?v=Yil2jWQ5Oqg
Looks Finnish, but could be Danish?
with the free PSN service, they are certainly losing a lot money
Yeah, I hate not paying for online gaming. It keeps me up at night - playing.
Maybe the statement is directed towards the tax office? There's probably some good writeoffs to be had if you can prove you are losing money rather than making a profit.
a little surprising considering they were SUPPOSE to be profitable on the PS3 back in April....
The economy tanked. That threw off everybody's balance sheets.
yea.....the Yen Strengthening with the US Dollar weakening fuck up a lot of Japanese companies....
You don't look surprised. Quite the opposite in fact.
How the hell can the PS3 cost so much? The cell is how many years old? The graphics is how many years old? Blue ray drives only cost 60 dollars for gods sake! You can probably build a pc with blueray(without the monitor or OS) for less than 300 thats more powerful than the freaking PS3!!!!
Nope you cannot. The cell cpu is powerful. The GPU is not, thus the on board one will suffice, but the CPU alone will cost you ~$150 (at least).
Good for them... Not
There's no loss, here. The BluRay drive is significantly cheaper then it was two years ago. The most expensive part of the PS3 is probably Cell... and that's been in production for years, now. And we know Sony isn't splurging on RAM. :p
They not be recouping their engineering costs as quickly as they like, but they certainly aren't loosing money on the hardware / manufacturing.
Between the CBE, a custom motherboard for the CBE, the XDR RAM, the Blu Ray drive, the Wifi, Bluetooth, optical sound, and HDMI out, it's not that crazy for it to cost $300+.....
Actually, they kind of are splurging on RAM. I know there's not a lot, but it's XDR RAM @ 3.2GHz. That's not your typical DDR2 800MHz.
maybe it is the hard drive in EVERY unit.
Sony should have read this article
http://news.spong.com/article/16226/Peter-Moore-Xbox-Hard-Drive-Killed-Us
MAYBE when the PS3 is 'hackable' people will start buying them. Personally, i wouldn't buy it even if a gun was pointed at me (ok, maybe then i would buy it). But i have lots of friends who are waiting for it to be hackable to buy one. And i think it's the smart thing to do. Don't get me wrong, i think piracy is bad. But i also think that those who don't harm the software companies with piracy, are the ones being harmed, let's see:
A console has about 10 year life cicle.
If you buy about 10 games per year, on that time.
At €70 each
It totals €7000...
And that's outrageous! That's stealing the consumers!
Nonetheless, PS3 is the cheapest and coolest Blu-Ray player on the market, so one point for that.
they got you paying 70 euro for a game? that IS ridiculous, since 70 euros = 100 usd (as of today). i'd stab someone if they started to charge $100 for games all of a sudden
I would buy it if it was hackable.
I don't want pirate games, I just want homebrew that can use the full power of the machine.
However, looks like they're actually going backwards - out-of-box Linux support was a step in the right direction, even if it didn't let you use all the power of the console, but now that the PS3 is in the right price range for me, they remove it... WTF?
Now I'll not buy it until someone confirms that you can still put Linux on it in some other way..
I already made the error of buying a 360
Thai is because I still won't buy one. $149.99? SOLD!!!