Xbox 360 could cost only half PS3's price by 2006

By Ross Miller

Analysts Merrill Lynch have delved into the hardware of two known next-generation consoles,
PlayStation 3 and Xbox 360, broken down the console cost part-by-part, and have come to a conclusion so diabolical it seems like perfect Microsoft strategy: towards the end of next year, Microsoft could easily sell their console for half the price of the PlayStation 3.

The biggest reasons, according to their
breakdown,
concerns the CPU and the Optical Media Drive. At launch, they estimate Sony?s system costing $495 to manufacture,
compared to the $340 for each Xbox 360. Sony is paying $75 more than Microsoft for its use of a Blu-Ray drive, and $60 for its Cell processor. With each console?s launch so far spaced out (at least 7 months, maybe more), the cost decay for the Xbox 360?s parts will lower it beyond the estimated $140 difference, and after 3 years Merrill Lynch estimates the cost of the PlayStation 3 to be $195, and the Xbox 360 $145.

This is all speculation, but if it were true, Microsoft could be poised for a hefty price drop for the Christmas season of 2006. Establishing a customer base with its hardware is Microsoft?s first priority, as they can recoup most expenses via Xbox Live and software sales. If Sony?s system were to really cost them $495 at launch, how much money do you think they will sell it for commercially? How much of a loss is Sony willing to take on each console sale?

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