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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