As was the case with every gaming console since the original PlayStation.

When they price a console for initial launch, they have a set plan in place that gives them a break-even point, and even a point of profitability once production costs come down. The PS2 cost more to make than they sold it for when it was new, too... but after a couple of years they started to be able to profit from the hardware, even with the lower pricing as it aged.

 

[QUOTE=vtec9,May 11 2006, 04:08 PM] Do you realize the PS3 is going to cost sony $700-$900 in component costs to build?

 

It seriously will cost them that kind of dollar to produce.

Eventually the costs will come down to that $50-70 area you're quoting, but not until they sell at least 35 to 40 million units.

Keep in mind they're paying 3rd parties to produce the CPU and GPU, and both of those components are not cheap to manufacture, especially with how complicated they are in this particular device.

 

It costs a pretty good chunk of change to make these consoles. Just the main CPU and graphic chips are quite expensive. Hard drives, memory, blu-ray drive, wireless. It all adds up. Some company figured out that Microsoft was spending about $525 in parts on each xbox 360. Your $30-40 estimate is ridiculously low.

 

[QUOTE=NFRs2000NYC,May 11 2006, 10:51 PM] You MUST be kidding.

A PS3 for sony is probably about 50-70 dollars tops to build.

 

Sorry guys, I dont buy it. Before you flame me, this is just my opinion, and I AM NOT selling this info as a fact.

First of all, ALL these chips, like the Cell processor and the like will be put into MANY other products, so the development and implementation costs will be WAY lower than projected.

Next, although they *might* sell about 40-50 million units, that figure might not happen. Do you expect me to believe that Sony will take a chance on losing money?

The Bugatti Veyron, which was a technical excercise, costs 400% more to build than its actually sold for. But its only 300 units.

As far as technology goes, the only reason it is expensive (Blue-Ray) is due to its exclusivity. There is nothing groundbreaking in Blue Ray. Just a better disc/player with higher resolution. Sure it would make a nice picture, but again, I refuse to believe it costs that much to produce.

Next, after 3 years, they claim to have the PS3 cost $320 dollars. First of all, the PS3 will cost $199 in 3 years, or even $150, just like all the past systems of "yore." Not only that, a 3 year old system is a "dinosaur" by the standards today (the way technology is progressing today) According to these numbers, Sony will NEVER make a profit on the PS3. Sorry fellas, still dont buy it.

Now, just to crunch some numbers....

At $599 MSRP...if they sold 20 million units worldwide, that would (according to your numbers) net Sony a 6 BILLION dollar loss. Thats 20 million is the conservative figure. First of all, Sony is rich, but not that rich. They are not a company that can just blow 6 Billion into the wind.

For my final point, I do not believe the Cell Processor costs a lot to build, since it is outsourced, and will be used elsewhere. You cannot have cost higher than profit for a product which is meant to be sold in the millions.

Again, this is ALL MY OPINION. I am not selling this to you as facts...just stuff for discussion.

 

SONY will make it all back in game sales.

This is nothing new, Microsoft has been losing money on the XBox console for years until most recently. Microsoft is currently losing $100 - $200 per XBox 360.

Is the PS3 a risky move for SONY? Sure it is. They could either wait it out until 2007, when the cell processor and Blu-Ray drive are cheaper but face an increasing uphill battle with Microsoft or release it in 2006 and suffer a big loss on each console but that they can recover from game and media sales.

The cell processor is very expensive and as far as I know, it is only being used by the PS3 and a high-end IBM server, although I could be wrong.

BTW, I don't think the PS3 will ever be sold for $199 or $149, even in three years. I think the cheapest we would see it during its life cycle is a $249 - $299 price point.

And if the PS3 costs $599 now, imagine what the PS4 will cost in 2015.

 

the only reason i'll get PS3 is for one game only.

DMC4

win.

 

Sorry NFR, I used to be in the industry... it truly does cost that kind of dollar to make a console when it's new.

They rely on software sales to provide profit in the first 2-3 years of a game console's life... and then if it was developed properly, and widely received... they'll start to turn a profit on hardware down the road as well.

1st parties will also make good profit on accessories. Cables, controllers, cameras, keyboards, etc. All of these items really are cheap to make, and they're sold at huge mark ups.

 

Right, but software, Sony doesnt make the large chunk. I believe they get about 27% of the 49.99 after you break down the costs/profits of the game. Also, aftermarket companies do NOT need to pay sony a dime for accessories, unless that want it to be an "official licensed product" so surely, they cant rely on that.

I might budge and admit it might cost more than $70 to build a PS3, but I just cannot believe $900.