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PS3 costs less than half to make than it did a year ago

Ever since the launch of the PlayStation 3, those who took exception to the console’s relatively high price criticized Sony’s decision to include an expensive Blu-ray Disc drive.

While developers such David Jaffe (God of War, Twisted Metal) wanted to do without the drive, Sony itself has said that the decision to include Blu-ray Disc hardware is the smartest decision it has ever made.

Now with the Blu-ray Disc format looking stronger than ever with the support of Warner Bros., the PlayStation 3 appears very well positioned as multimedia machine that appeals to more than just the gaming market.

Along with consumers, Sony felt the pain of its high console price at the time of the PlayStation 3 launch in November 2006. iSuppli estimated that the initial cost of manufacture for the console was $840.35 for the 60GB model.

Since then, however, Sony has managed to close the gap considerably on its loss on every unit sold. Nikko Citigroup’s Kota Ezawa, quoted by BusinessWeek, says that each PS3 costs Sony around $400 to manufacture. Ezawa estimates that SCEI will lose $1.4 billion this fiscal year, following last year's $2.1 billion loss.

The falling price of PlayStation 3 components is thanks to the increase in yield and supply of blue-violet laser diodes used in the high-definition optical drive in the console. Another large help in reducing costs was the Cell Broadband Engine chip’s shrink to 65nm.

SCEI chief Kazuo Hirai at CES told the media that the PlayStation division of the company aims to be profitable starting next fiscal year.



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Price drop soon?
By ZebuluniteV on 1/14/2008 7:02:35 PM , Rating: 2
Now that Sony's breaking even on the PS3 hardware, and the Blu-ray/HD-DVD battle seems decided in Sony's favor, hopefully a PS3 price-drop is in the works (which will probably occur around E3/Summer).




RE: Price drop soon?
By Greybush on 1/14/2008 7:07:29 PM , Rating: 1
Price drop? why would the drop the price if they're only breaking even...they want to make money not lose it. There won't be a price drop until the manufacturing cost goes down significantly.


RE: Price drop soon?
By ZebuluniteV on 1/14/2008 7:30:27 PM , Rating: 1
I'm not sure if Sony ever made money selling PS2 hardware (at least not for a while), and Microsoft never made money selling Xbox 1 altogether (yet alone the hardware itself), yet both of them received repeat price drops


RE: Price drop soon?
By Christopher1 on 1/18/08, Rating: 0
RE: Price drop soon?
By tygrus on 1/14/2008 7:32:01 PM , Rating: 5
Consoles are "loss-leaders". They make the rest by collecting $$ per game made by developers. They are also trying to make money from the video publishers using Blue-Ray (BD-ROM). If the cost of production goes down another $50 per unit then they might cut the reatil prices by $100, say around June.


RE: Price drop soon?
By darkblade33 on 1/14/2008 7:47:10 PM , Rating: 3
To what you say..

Yes all the cash is made from game sales..
With X360 leading the way on a strong 1st place in games sold per console ..and Wii in second place.. PS3 is selling better, but the game selection must be hurting it ??


RE: Price drop soon?
By BansheeX on 1/14/08, Rating: 0
RE: Price drop soon?
By walk2k on 1/14/2008 8:11:40 PM , Rating: 2
Warhawk is $40. The $60 version comes with a headset.

We'll see price cuts on all those games - because that's what they do with old games.......

As for Xbox - MS's games unit has never made any money at all, ever. I think they're up to about $5B loss now. FYI.


RE: Price drop soon?
By darkpaw on 1/15/2008 12:04:47 PM , Rating: 2
Other then the mistake about warhawk, I'm not sure why he got rated down. The fact that release games like Resistance are still full price a year later is a factor. I've bought one retail PS3 game since July due to the high prices.

Since November, I've bought 5 used/low cost 360 games. I know a lot of other gamers that will only buy reduced price games for anything except the megahits. Sony really needs to start pushing down the price on the earlier games ($30 greatest hits, whatever).


RE: Price drop soon?
By BansheeX on 1/14/2008 7:57:41 PM , Rating: 2
Not sure if they're quite ready to care about money over sales just yet. Rumor has it the RSX will get shrunk to 65nm this spring, possible bringing the 40gb version down to $349 before the MGS4 launch.


RE: Price drop soon?
By DeepBlue1975 on 1/15/2008 2:46:11 PM , Rating: 2
The idea behind consoles is more about making profit from their software sales than from selling the hardware itself.

Hardware, you have to produce every one you sell, thus it is a low profit practice in comparison to games: you program the game once, then you sell it zillion times by just making dirt cheap copies and putting a label on it.


RE: Price drop soon?
By jamdunc on 1/14/2008 7:27:48 PM , Rating: 5
How are they breaking even? It cost $400 to make, and I'm guessing they're talking about the 40Gb model, so $400 to make, and the shops sell it for £399.99 with Spiderman on Blu-Ray.

The shop needs some profit and the wholesalers need some profit, and then there is advertising and packaging costs.

If we make up some figures and say the shop makes $10 and the wholesaler makes $5 and the adverts are about $3 per PS3 and then $2 for the packaging (love random figures :p) we can equate:

400 - 10 - 5 - 3 - 2 = 380

And in my example that means that Sony makes a loss on every one still. And I can guess that my figures are probably a little bit low and they don't account for everything either. Oh and the cost of the Blu-Ray film.

So not breaking even by a long shot yet.


RE: Price drop soon?
By ZebuluniteV on 1/14/2008 7:33:39 PM , Rating: 3
You're right on that, I posted without thinking about those details...at any rate, more than halving the manufacturing costs in a bit over a year is certainly an achievement for Sony (or at least a reversal of a major screw-up)


RE: Price drop soon?
By TSS on 1/14/2008 7:35:24 PM , Rating: 2
well their not breaking even but not with a long shot either.

next fiscal year isn't that far away, i believe it starts in june or juli 2008. why on earth the fiscal year is half a year ahead of the calender beats me, but it is that way.

besides it's the division that promises to be profitable, i'd imagine stuff like controllers is also included.


RE: Price drop soon?
By Zelvek on 1/14/2008 9:21:09 PM , Rating: 2
so you don't have to do year end at Christmas/holidays.


RE: Price drop soon?
By xsilver on 1/14/08, Rating: 0
RE: Price drop soon?
By ajfink on 1/14/2008 8:58:07 PM , Rating: 2
I live in the US and if someone handed me Euros or British Pounds I'd take them, certainly.

A cheaper PS3 bodes well, but as soon as Sony introduces a price cut, so will Microsoft. If it weren't for the cost of replacing defective consoles, the 360 would probably already have received a price cut. That being said, it's probably a good bit cheaper to produce a 360 these days than it was a year or so ago when it was announced that they were selling for a profit.


RE: Price drop soon?
By treehugger87 on 1/14/2008 9:53:33 PM , Rating: 3
But most of all you would want to accept Canadian dollars. Go Canada.


RE: Price drop soon?
By psychobriggsy on 1/15/2008 6:10:26 AM , Rating: 2
To be fair Microsoft never said they were selling the XBox360 for a profit. iSupply guessed they were, and the numbers were extremely suspect (at the time there had been no cost-cutting measures in the XBox360 like die shrinks or cheaper components or reduction in parts) as they seemed to think that there had been over $200 of savings elsewhere (yield and production improvements, natural price drops for other components) in under a year.

The PS3 has had one die shrink for the CPU, they've removed the PS2 functionality (and redone the entire motherboard too), and their main cost - the BluRay drive - has collapsed in price as Sony knew it would all along. Still, I'm surprised it has dropped so much.

The only thing that will stop the PS3 becoming profitable itself for Sony is the fact that they'll need to drop the price to around $299 this year. 65nm RSX can't fix that.


RE: Price drop soon?
By djc208 on 1/14/2008 9:45:13 PM , Rating: 2
Unless you're Nintendo which skipped right to phase 3 while still being "cool".

They've managed to pull off an Apple-esque place in the console fight. Difference is most people still like Nintendo.


RE: Price drop soon?
By Oroka on 1/15/08, Rating: -1
RE: Price drop soon?
By Circle T on 1/15/2008 12:33:22 AM , Rating: 4
If someone walking in front of you causes the sensor bar to not track the Wii-mote, then it stands to reason that you can't see the TV at that point either. Which, by your logic would make your eyes an EPIC POS!!!

What a disappointment. If I can't sit at my kitchen table, 2 rooms away from my TV, without my Wii-mote losing connection to the sensor bar, it must be rubbish. It must work, under even the most unlikely, and certainly unreasonable times, or its junk.


RE: Price drop soon?
By Christopher1 on 1/18/2008 7:35:54 PM , Rating: 1
LOL! Unfortunately, that is what some people go with: If I can't use it from the MAXIMUM distance that it says it can be used, or through 5 walls made of concrete and steel, it must be a PoS.


RE: Price drop soon?
By KernD on 1/15/2008 12:43:59 AM , Rating: 3
You seem confuse, so let me clear things up for you.
Bluetooth is wireless communication protocol... when you pass in front of a Wii remote, the wireless communication still works, just like the Bluetooth on your PS3, what doesn't work is that they block the 2 infrared light in the bar on your TV, which means your Wii can't tell where the remote is pointing at the screen. Bluetooth couldn't tell where your pointing your remote anyway. So no, you haven't been spoiled by your PS3.

Maybe they could have gone with something else, but nothing is perfect. Anyway, if they pass in front of you while you play, how can you see the screen? Why don't you pause the game when someone want to pass in front of the TV, like everyone else?


RE: Price drop soon?
By Alexstarfire on 1/15/2008 1:21:59 AM , Rating: 2
I've never had that happen. I know that for some games you can get a bit too far away, even though I know the Wii can still sense the remote from that distance. Games like Budokai Tenkaichi 2. You have to be relatively close to the screen for some reason. But then you have games like Guitar Hero which seems to work through a wall. I know since I accidentally hit the start button like 2 rooms away and I lost cause the game unpaused. It's certainly better than the SIXAXIS controller. I hate that it's $60 for the wiimote and nunchuck though.


Not even, yet
By munim on 1/14/2008 7:07:39 PM , Rating: 2
It's not breaking even, yet. Unless they're talking about the 80GB version and sony sells it to retailers for at least $400.




RE: Not even, yet
By ADDAvenger on 1/14/2008 7:12:57 PM , Rating: 2
And that's not even counting shipping, advertising, accounting, etc, etc.


RE: Not even, yet
By ImSpartacus on 1/14/2008 7:26:02 PM , Rating: 3
Yeah, but they'll make a profit eventually. I'm sure the PS2 still brings in a respectable amount to the table in games sold.

Just like the PS2. It sucked in the beginning, but eventually became the leader (and still isn't doing terrible).

The Blu Ray drive really helped Sony pull ahead against HD-DVD. Not to mention it can be applied to games.


RE: Not even, yet
By walk2k on 1/14/2008 7:21:37 PM , Rating: 2
The article isn't clear which version... but if it's the 80GB version, there is certainly profit there. Retail margins on these products are very small, maybe 5%, or less. So at $500 Sony is certainly making a profit.

That doesn't mean the division as a whole is in the black however - with advertising and all the other overhead costs factored in.


Cell is the cost Issue
By Zelvek on 1/14/08, Rating: 0
RE: Cell is the cost Issue
By jamdunc on 1/15/2008 10:14:02 AM , Rating: 1
Rated down for telling the truth, I feel sorry for you dude, and I truly agree with you. Cell could be awesome but it's too hard and costly, unless your a Sony first party studio.


RE: Cell is the cost Issue
By xeltor on 1/15/2008 10:08:01 PM , Rating: 2
Wow he even complemented how powerful it is and they rate him down.


RE: Cell is the cost Issue
By Circle T on 1/15/2008 11:37:09 PM , Rating: 2
***BREAKING NEWS***

It has been discovered today that even though you speak truth to a fanboy, they don't accept it, and will hate you for it.


cha-ching for Sony
By Oroka on 1/15/2008 12:10:12 AM , Rating: 3
Sony can pretty much start writing post dated checks right now for the next fiscal year. With the PS3 breaking even, unit sales are up, more (good) games are comming out, and Blu-Ray poised to win the format war, FY08 will be a good year for Sony. Every BD-DVD sold Sony will get royalties on, and not loosing $ on PS3 hardware = $$$$$$$$$$

Sony bet the farm on Blu-Ray, even risking the PS3 on it, and it will all pay off hansomly in the end.




RE: cha-ching for Sony
By morton on 1/15/2008 8:02:27 AM , Rating: 2
quote:
Sony bet the farm on Blu-Ray

quote:
it will all pay off hansomly in the end


It's going to pay off in 2 wheeled, horse-drawn carriages?? Ahh, they're probably coming from the farm.


Manufacture
By omnicronx on 1/15/2008 3:20:26 AM , Rating: 2
Am I the only one that notices the word Manufacture. They are far from breaking even, if it costs them $400 before they leave the plant.




RE: Manufacture
By jamdunc on 1/15/2008 10:12:09 AM , Rating: 2
No dude, some of us did notice that too :)


WHere are the cheap BR-ROm drives?
By zombiexl on 1/14/08, Rating: 0
RE: WHere are the cheap BR-ROm drives?
By zombiexl on 1/14/2008 8:05:39 PM , Rating: 2
Typo's galore..

If the entire PS3 costs $400 to make, we should be seeing BD-ROM drives for about $100 in retail.

Again I ask, where are the cheap BD-ROM drives?


By killerroach on 1/15/2008 10:23:09 AM , Rating: 1
Newegg has BD-ROM drives for sale for under $200, although it should be noted that such drives for PC aren't going to experience anywhere near the same economies of scale that the BD-ROM drive in the PS3 has going for it... after all, how many BD-ROM drives do you think they sell for PCs, anyway?


Standalone Blu Ray prices
By pomaikai on 1/15/2008 10:06:43 AM , Rating: 3
If it costs $400 to develop a gaming console with a Blu Ray player they are really ripping people off on the price of a standalone Blu Ray player.




Do as Wii do
By dflynchimp on 1/15/2008 9:55:29 AM , Rating: 2
As with all early adopters, Sony paid a hefty premium on the PS3, spearheading all that research to obtain the cutting edge. The PS3 is an impressive piece of technology, but not profitable as a commercial product.

Nintendo meanwhile is raking in a profit for every Wii sold, despite the console being the least capable of the three current gen consoles.




By Shadowmaster625 on 1/15/2008 10:44:39 AM , Rating: 2
If they skipped blu-ray at launch, what would the impact have been? Well they could have sold the console for $100 less. This would have pushed millions more of them out the door over the last year. Also, they could have released it when the 360 was released. Both of those factors would have increased the volume and lowered the price even more.

What would gamers have lost by not having blu-ray? Not a damn thing of course. So you might have to change discs more often. Big deal. Is it really worth it to pay an extra $100 just to avoid having to change discs or install more than one disc? lol only in the mind of the average debt laden consumer!

Gamers actually got quite screwed by sony. Because the cost and the delays cut down on the number of consoles sold which cut down on the number of games released. But that there blu-ray is oh so important!

Sony would rather lose a boatload of money and forfeit this generation, and, possibly, even allow microsoft to turn a profit on their gaming division! Amazing!

The funniest part of it all is the armies of mindless morons who cheer over the fact that they took one up the butt. Congratulations! You got ripped off again, as if its something to be proud of!




By Techno Pride on 1/15/2008 10:51:17 AM , Rating: 2
Most of the money is made from royalties that game developers pay. Consoles are always sold at a loss at the beginning in order to create a market.

It takes a few years after a console's release to breakeven on the hardware part. By then, we'll all be talking PS4, and PS3 will be so yesterday.




Cost
By wallijonn on 1/15/2008 11:58:57 AM , Rating: 2
quote:
The falling price of PlayStation 3 components is thanks to the increase in yield and supply of blue-violet laser diodes used in the high-definition optical drive in the console.


I think it may have to do more with it being manufactured in China.




ALERT!
By Circle T on 1/14/08, Rating: -1
RE: ALERT!
By Polynikes on 1/14/2008 8:45:46 PM , Rating: 1
But if no one is there, does the poop still smell bad?


RE: ALERT!
By Circle T on 1/14/2008 9:29:40 PM , Rating: 2
Stay tuned. More news at 11.


RE: ALERT!
By Circle T on 1/15/2008 12:27:14 AM , Rating: 2
***NEWS UPDATE***

Apparently the people who voted me down seem to think that manufacturing costs on an advanced piece of tech dropping drastically in the early months is something new. Really?? Its news to you that things like this happen??


RE: ALERT!
By Polynikes on 1/15/2008 11:25:15 AM , Rating: 2
Apparently the word "poop" is highly offensive to some.

POOP!


RE: ALERT!
By Circle T on 1/15/2008 2:06:09 PM , Rating: 2
OH NO! You said it again, TWICE!! They're going to really hate us now.


Yes PS3 won!
By Serafina on 1/15/08, Rating: -1
RE: Yes PS3 won!
By Aloonatic on 1/15/2008 7:26:47 AM , Rating: 3
I never understand the need for people to claim that one console has won over another.

The xBox and the PS3 will both win, but they will win different battles as they are after different markets.

xBox is after gamers first, media hub second and the PS3 is the opposite, as far as I can tell.

The important thing is that people that have bought either console have not "lost" as in the last days of the SEGA years, which must have been very disappointing for all the Dreamcast, 3DO, Jaguar adopters and I'm sure there's more.

No one's won, no one's lost, lets just all be happy, play our games and watch our movies in peace.

Of course both are dependent on the purchase of a wii to keep the girlfriend/wife/kids quiet whilst you're playing on your PS3 or xBox, but that's a different matter.

FYI, I have a PS3 and I'm not exactly excited about it, having been stupid enough to pay ~£500 for it with a second controller and a couple of games a month or two after it was released in the UK.

Any news on Grand Theft Auto and MGS???


RE: Yes PS3 won!
By wonderhat7 on 1/17/2008 7:02:47 PM , Rating: 1
Sony manages to market the PS3 and PSP to black people pretty well
jkjkjk
but seriously
NO HA JK


once again rigth
By michal1980 on 1/14/08, Rating: -1
RE: once again rigth
By Master Kenobi (blog) on 1/14/2008 8:24:00 PM , Rating: 1
Has little to do with that. Sony will end up the loser of this console generation, but the winner with Blu-Ray. This will also mean that both Nintendo and Microsoft will be putting out the next generation of console long before Sony. Time will tell if it was really a good business decision in the long run. Console leader or Format leader, I'm not familiar with format royalties but I would imagine that being the console leader would have made them more money, I could be wrong.


RE: once again rigth
By cochy on 1/14/2008 9:47:35 PM , Rating: 2
quote:
Sony will end up the loser of this console generation


It's a little early to say that. The PS3 has at least a 6-7 year shelf-life and it's only 1 year old. The PS2 was selling better than ever towards the end of it's life breaking all sorts of records. It was no secret that the best the PS3 has to offer is still further down the road.


RE: once again rigth
By Master Kenobi (blog) on 1/14/2008 10:19:07 PM , Rating: 3
That far down the road risks them getting one-upped by Microsoft and/or Nintendo, likely both. Given how fast the physical hardware capabilities of tech advance each year, its easy for both it's competitors to produce a superior system and market it as being the next best thing, and the PS3 is old and can't compete with any of a list of things such as....
-Graphics
-User Input
-Speed
-Capabilities

There is a certain edge to having the most powerful machine on the block, and with that claim comes the ability to sell games for your system that can exceed the capabilities of your competitors. The marketing then pushes that the experience you can have on their system is vastly superior to the experience of the competitors older system.

From a market stand point, the PS3 likely has a 6-7 year shelf life, the PS2 is still having a long run as well. But there can't be denied that there is a large market for the "next best thing" as can be seen by the release of the Wii, X360, and PS3. For Sony to get left behind, they would lose their ability to claim they are on the cutting edge. This would be a departure from the PS1, PS2, and PS3, which at the time of release were widely considered cutting edge and very advanced.

Microsoft, has proven to be an effective competitor and is giving Sony lots of problems in the Console market. Nintendo seems to have skated around the issue by not directly competing against the other two. The battlefield is then divided between X360 and PS3 for your traditional console gamers, and right now the X360 is wiping it's rear with the PS3. By the time the PS3 platform matures, it wouldn't be unrealistic if Microsoft is on the verge of it's next platform release, offering superior capabilities and operability compared to the PS3. So while Sony may have claimed the PS3 will last for at least 10 years(and it very well could as a platform), market forces will cause them to release the PS4 within a year of the next Microsoft release.


RE: once again rigth
By psychobriggsy on 1/15/2008 6:27:57 AM , Rating: 2
Microsoft seem to intend to push the console market from a 5 year release cycle to a 4 year cycle. Hopefully this time they won't EOL the current console when the next one is released, something I thought was very unfriendly to the consumer. I guess they were losing billions of dollars hand over fist trying to be an effective competitor, and the slim PS2 made the original XBox very undesirable.

The PS3 could have a 10 year shelf life overall - the PS2 is in its eighth year and still selling very well - and I wouldn't bet against Sony selling over 100 million PS3s in those 10 years and turning a profit on 70m of them. Sure the PS4 will come out in 4 years time, and indeed could turn out to be a PS3 on steroids (why invent a whole new architecture if the current one has a scalability path) which could mean that Sony has the capability to launch the PS4 in a more timely manner and not take such a loss (no BluRay debacle, 100GB BluRay will be more than enough) as the PS3.


RE: once again rigth
By darkpaw on 1/15/2008 11:33:35 AM , Rating: 2
MS made some really lousy contracts with their suppliers on the first Xbox and got almost no cost savings as hardware prices dropped. MS wanted to get a console out as fast as possible, so went with all off-the-shelf components. Since Intel owned the CPU and nVidia owned the GPU, MS was still paying original prices as the vendors slashed actual production costs. That is one of the reasons it took such a huge loss, and the main reason it was killed as soon as the 360 was out.

MS was smart enough not to make that mistake twice though and fixed that this time around. Yah, it sucked they immediately killed the original Xbox, but they did have some very good reasons for it.


RE: once again rigth
By Zelvek on 1/14/08, Rating: 0
RE: once again rigth
By xeltor on 1/14/2008 10:43:53 PM , Rating: 1
quote:
yet the haters disagreed with me.


Haters eh? look who's talking. All you ever do is bag on sony's competition your just a stuckup fanboy.


RE: once again rigth
By michal1980 on 1/14/08, Rating: -1
RE: once again rigth
By xeltor on 1/15/2008 9:59:40 PM , Rating: 2
Care to explain where I expressed any negativity towards sony? Just look at your stupid comments its obvious your a fanboy.


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