Games By Matthew Humphries Nov. 19, 2013 9:30 am
Back in September Sony admitted that when the PS4 was launched it would be making a loss on every console sold. However, that loss was small, and would easily be recouped through games sales and PlayStation Network subscriptions. With the console now available and multiple teardowns of the hardware carried out, it looks as though Sony was being accurate and is making a small loss on every console.
Research firm IHS has put together a costing based on the components identified as used in the PS4. Their total comes to $381 for manufacturing the machine, which is just $18 less than the console’s retail price. That translates into a loss when you factor in packaging, shipping, the retailer’s profit margin, advertising, and the research and development costs Sony incurred, but this is still good news for Sony.
Being $18 under the retail price at launch is a far better situation to be in than the $200+ loss each launch PS3 made. With an average sell through rate of two to three games per console and the much greater need for a PSN subscription, it seems likely most console sales will actually net Sony a small profit. And lets not forget they managed to sell a million of them on day one.
The biggest costs inside the PS4 for Sony are the main processor, which AMD charges them $100 for, and the 16 memory chips that are thought to cost $88. Those are two costs that will reduce over time, especially the processor cost. Sony will also benefit if hard drive pricing falls (currently $37 for each 500GB drive), or if the console proves to be extremely popular allowing them to place even larger orders for components.
Sony already enjoys a big price advantage over the Xbox One, and it seems likely there will be a manufacturing cost advantage, too. The new Kinect is thought to cost almost as much as the Xbox One console, which surely cuts into any profit margin Microsoft can build in to the console retail price. Hopefully we’ll know before the month is over how much the Xbox One costs to manufacture.
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Research firm IHS has put together a costing based on the components identified as used in the PS4. Their total comes to $381 for manufacturing the machine, which is just $18 less than the console’s retail price. That translates into a loss when you factor in packaging, shipping, the retailer’s profit margin, advertising, and the research and development costs Sony incurred, but this is still good news for Sony.
Being $18 under the retail price at launch is a far better situation to be in than the $200+ loss each launch PS3 made. With an average sell through rate of two to three games per console and the much greater need for a PSN subscription, it seems likely most console sales will actually net Sony a small profit. And lets not forget they managed to sell a million of them on day one.
The biggest costs inside the PS4 for Sony are the main processor, which AMD charges them $100 for, and the 16 memory chips that are thought to cost $88. Those are two costs that will reduce over time, especially the processor cost. Sony will also benefit if hard drive pricing falls (currently $37 for each 500GB drive), or if the console proves to be extremely popular allowing them to place even larger orders for components.
Sony already enjoys a big price advantage over the Xbox One, and it seems likely there will be a manufacturing cost advantage, too. The new Kinect is thought to cost almost as much as the Xbox One console, which surely cuts into any profit margin Microsoft can build in to the console retail price. Hopefully we’ll know before the month is over how much the Xbox One costs to manufacture.
More...
