Sony Cuts PlayStation 3 Costs in Half, Analyst Says

[Andy Chalk]

Sony Cuts PlayStation 3 Costs in Half, Analyst Says

An industry analyst says PlayStation 3 [http://www.sony.com] console in half, which will mean a significant improvement in the fortunes of the company's games division.

According to a Nikko Citigroup [http://www.businessweek.com/globalbiz/content/jan2008/gb2008018_681920.htm]said Sony has managed to cut the production cost of the PlayStation 3 to roughly $400 per unit, compared to a rate of over $800 per unit prior to the system's release in November 2006. While he doesn't expect the business to become "prosperous" until late in 2009, he did estimate the reduction in costs will lower the games division losses to $1.4 billion this fiscal year, down from a loss of $2.1 billion the previous year.

In a report issued on December 27, Ezawa wrote, "We think the biggest factor here is that simplification has become possible through a reduction in the parts count, leading to a reduction in costs." The growing adoption of the Blu-ray format is also expected to boost the fortunes of the PlayStation 3 in the future.

Sony CEO Kaz Hirai referred to the PlayStation 3 cost reduction at the Consumer Electronics Show last week, expressing hope [http://www.escapistmagazine.com/news/view/80487]the system would become profitable in Sony's next fiscal year, beginning in April. "The 40 gigabyte PlayStation 3 obviously has fewer components, and uses less power, which means that components required to dissipate heat, for example, can be smaller, so there is some cost reduction there," he said.

"[Profitability] is not a definite commitment, but that is what I would like to try to shoot for."


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[PurpleRain]

If Sony does cut the cost... why buy a Blu Ray player then for $1000 when you can get this for less then half?!

 

[DrmChsr0]

Still too expensive to make or buy, when compared to the XBOX 360 and Wii.

 

[Niccolo]

Wait wait wait... Isn't this old news? I mean, I live in Australia, like the LAST PLACE ON EARTH to receive anything new, and the 40-gb PS3's been out for ages!

 

[Jinky Williams]

Firstly, it appears as if some of the commenters misunderstood the content of the news. They weren't saying that we should expect any kind of price drop on the end-consumer side. They were saying that Sony has developed production methods that have dropped *their* cost in half.


"If Sony does cut the cost... why buy a Blu Ray player then for $1000 when you can get this for less then half?!"

Check this link out: http://www.ultimateavmag.com/hddiscplayers/1206ps3blu/ It's a year old, so some things have changed, but it still should do a good job of explaining the pros and cons of using the PS3 as a Blu-Ray player. You can also Google the phrase "ps3 as blu-ray player" and get lots more commentary (but, like this one, you'll find that a lot of them are ~1 year old).


"Still too expensive to make or buy, when compared to the XBOX 360 and Wii."

On what grounds do you make that call? Evidently Sony believed that it wasn't too expensive to make, and the millions of PS3s sold (http://nexgenwars.com/) seem to lead me to conclude that many people think that it isn't too expensive to buy.

Understandably, at first glance, it seems like a rather poor business strategy to manufacture something and then retail it for less than your cost. And if you were a company like Nintendo, who's primary source of income is video games, then you'd be right. However, for companies like Sony and MS, the money spent here, though not by any means trivial, are pretty much just marketing investments. I believe that their individual entries into the world of gaming is not an end in itself (like Nintendo), but a means to the end of deeper market penetration. Just another way to get more mindshare. Additionally, with the PS3, it was a push to get Sony's new Blu-Ray player into as many homes as possible to do their best to ensure that it, not HD-DVD, was the winner of the new format wars.

 

[Ydna]

The article is being kindof deceiving in that sense. The truth of it is there's never a SET production cost for anything...but rather the cost starts high initially, but then decreases after you make more and more of the products. That's why they mentioned PS3s not being profitable until later.

That's a pretty common situation. I wouldn't be surprized if all theother consoles cost at least the MSRP during their first few months. But of course their popularity being so much higher than PS3, combined with the naturally lower production cost due to hardware, probably ensured that they're already profitable at this point in the game.

 

[Damn Dirty Ape]

Well good for them! I'm still not buying one though. Especially not now since the formatwar still isn't over and there is talk about a blueray for the 360.

 

[braincore02]

The article is being kindof deceiving in that sense. The truth of it is there's never a SET production cost for anything...but rather the cost starts high initially, but then decreases after you make more and more of the products. That's why they mentioned PS3s not being profitable until later.

? did you read the article? it says they managed to create the same machine with fewer parts, hence it costs them less per unit. nothing to do with how many they've made, more to do with the improved efficiency of their production techniques. ps3's won't be profitable until later because they've lost so much money already, they have to recoup that before they enter the realm of profitability. and even if their production costs are currently reduced, and it's only costing them $400 to make, they're basically selling it at cost, with the intention of making their money back thru the licensing of games for the system. since there aren't too many exclusive games that people want to play, it will still be an uphill battle to get profitable.

me i can still wait on a ps3 until GT5 prologue comes stateside. then i'll prolly take the plunge.

 

[Arbre]

It's an interactive blu-ray player, and you can even play games on it!
Now that they may start loosing less money, they may be a bit more relaxed and start to work on EyePees. I know, it's not very related but... hell.