PS3 Loss Down to Just Eighteen Bucks

[ZippyDSMlee]

so what then? 1 or 2 million units and 3 years later it finally makes enough to pay off its debt? Nintendo has the right idea....well... mostly......

 

[Treblaine]

Hmm, figures like loss of $37 "Per console" and the with no hardware revision I has gone down to "$18 per console" does beg the question of how much it actually cost "per console". I mean the console itself is mostly a pile of plastic, silicone and a trace amount of other metals, there is the time taken to make each one but that is mostly automated.

I think it is pretty poor economics to get too worked up about cost "per console" and seems to me like a fallacy.

I mean there are costs... and then there is revenue. You can't just divide the cost by the number of consoles to get the cost per console, it doesn't work like that.

Yes it does. That is exactly how it works. It's called Average Cost (AC) and it is as important to microeconomics as TC (what you are proposing Sony go by).

So. The cost "per console" is literally the amount of cost put into each console from the assets taken into the company (raw materials or pre-made components), and does not factor in the cost of new piece of manufacturing equipment, like say a robot that can build the PS3 Slim? Or does it? I'm confused.

When Sony says "cost per console" what do they ACTUALLY mean? What costs?

 

[Zepren]

Ha-Ha. God that's bad, so in 2011 how many years will the PS3 been out?
That's all insane like.

 

[thenumberthirteen]

I still can't believe that they actually lose money on each sale. It just seems weird that if I buy a PS3 i'm costing Sony money. We should stop buying PS3s and then they can get back on their feet.

 

[sidereal_day]

Hmm, figures like loss of $37 "Per console" and the with no hardware revision I has gone down to "$18 per console" does beg the question of how much it actually cost "per console". I mean the console itself is mostly a pile of plastic, silicone and a trace amount of other metals, there is the time taken to make each one but that is mostly automated.

I think it is pretty poor economics to get too worked up about cost "per console" and seems to me like a fallacy.

I mean there are costs... and then there is revenue. You can't just divide the cost by the number of consoles to get the cost per console, it doesn't work like that.

Yes it does. That is exactly how it works. It's called Average Cost (AC) and it is as important to microeconomics as TC (what you are proposing Sony go by).

So. The cost "per console" is literally the amount of cost put into each console from the assets taken into the company (raw materials or pre-made components), and does not factor in the cost of new piece of manufacturing equipment, like say a robot that can build the PS3 Slim? Or does it? I'm confused.

When Sony says "cost per console" what do they ACTUALLY mean? What costs?

AC is simply the total costs of manufacturing all units divided by the number of units sold. If you're looking for specific costs, I can't help you as I'm not privy to that information. But for your robot example, if a robot was needed to manufacture them, the cost of the robot is factored in. To give an example:

Material: $50
Labor: $10
Capital (which includes the robot): $100

These are total costs in each category, for a grand total of $160. If Sony sold 8 PS3s, then the AC of the PS3 is $20. If they sold PS3s for $18, they are eating a $2 loss per console.

Keep in mind that in the real world the costs of manufacturing include advertising, licensing, etc. I just didn't include them because I don't want to do math atm.

Does that help?

 

[Treblaine]

Hmm, figures like loss of $37 "Per console" and the with no hardware revision I has gone down to "$18 per console" does beg the question of how much it actually cost "per console". I mean the console itself is mostly a pile of plastic, silicone and a trace amount of other metals, there is the time taken to make each one but that is mostly automated.

I think it is pretty poor economics to get too worked up about cost "per console" and seems to me like a fallacy.

I mean there are costs... and then there is revenue. You can't just divide the cost by the number of consoles to get the cost per console, it doesn't work like that.

Yes it does. That is exactly how it works. It's called Average Cost (AC) and it is as important to microeconomics as TC (what you are proposing Sony go by).

So. The cost "per console" is literally the amount of cost put into each console from the assets taken into the company (raw materials or pre-made components), and does not factor in the cost of new piece of manufacturing equipment, like say a robot that can build the PS3 Slim? Or does it? I'm confused.

When Sony says "cost per console" what do they ACTUALLY mean? What costs?

AC is simply the total costs of manufacturing all units divided by the number of units sold. If you're looking for specific costs, I can't help you as I'm not privy to that information. But for your robot example, if a robot was needed to manufacture them, the cost of the robot is factored in. To give an example:

Material: $50
Labor: $10
Capital (which includes the robot): $100

These are total costs in each category, for a grand total of $160. If Sony sold 8 PS3s, then the AC of the PS3 is $20. If they sold PS3s for $18, they are eating a $2 loss per console.

Keep in mind that in the real world the costs of manufacturing include advertising, licensing, etc. I just didn't include them because I don't want to do math atm.

Does that help?

Err, not really because although I now know about the concept of "AC" still don't know what Sony are specifically talking about when they say "we're only losing $18 per console"

I mean the PS3 sells for drastically different prices in different regions, and then there is the gap between retail and wholesale price... grrr, this has all become so obfuscated that it is impossible to draw any useful conclusions.

I don't even have a frame of reference with contemporary consoles, figures in isolation are meaningless.

I think I'm going to stay out of the economics side of video gaming... to many factors are held as trade secrets. Too many bullshitting analysts.

 

[qbanknight]

took you guys a few years, eh? well now you can happily start making profits and call your selves successes

 

[sidereal_day]

Err, not really because although I now know about the concept of "AC" still don't know what Sony are specifically talking about when they say "we're only losing $18 per console"

I mean the PS3 sells for drastically different prices in different regions, and then there is the gap between retail and wholesale price... grrr, this has all become so obfuscated that it is impossible to draw any useful conclusions.

I don't even have a frame of reference with contemporary consoles, figures in isolation are meaningless.

I think I'm going to stay out of the economics side of video gaming... to many factors are held as trade secrets. Too many bullshitting analysts.

Well, what usually is the case is that stores buy consoles from Sony (or from a warehouse that bought them from Sony). The loss they are talking about is whatever price the store or warehouse bought the console for minus the cost of producing it (it'll be a negative number in this case).

I don't know what the price they charge stores is and can't be arsed to find it. Sorry

But I know this isn't just a problem in the video game industry. I remember trying to this sort of analysis on a wide range range different industries for an intermediate microeconomics course a few years back. Most companies are loathe to give out real numbers outside of what the FTC requires of them in the case of publicly traded corporations for fear of competitors gaining an advantage.

 

[SaintWaldo]

Isn't the PS4 rumored to be comming in 2011-2012-2013-2014?

No, unless you count your post as starting the rumor.

 

[Indecizion]

Hurrah go sony go XD

 

[TheNumber1Zero]

Well that's nice to hear. I don't know why it's nice to hear, but for some reason it is.
Thank you.

 

[Pimppeter2]

Thats good to hear. I still can't believe Sony was right about PS3 eventually being successful in the long run. Kudoes to them.

 

[Kuchinawa212]

Yay!

I think.
I mean I hope they could have broke even by now. =/

 

[Syphonz]

I don't really see how it helps, I purchased my 360 a year ago because it was far far cheaper then a PS3, and other then a tiny amount of games that look interesting that are only out on the PS3 I have no incentive to spend more money on another console, I think a lot of people would feel similarly.

Don't call me a fanboy, if the PS3 had been cheaper and had the games I wanted when I made my purchase I'd of likely got that, but it was much more expensive, and now that it's down in price, I've already got my 360, got a ton of games, and everything I want is coming out on the 360 as well, so why would I buy another console?

this article was not trying to sell you the console

well... duh... I was simply pointing out that making loosing less money on each console wont be enough to get over the hurdle they set up by pricing themselves right out of the market, the thing was more expensive then some cars I've owned when it first came out.

It's a luxury item, and luxury items aren't cheap. Sure, it's a games console, but it does far more than just games (no, this is also not an attempt to get you to buy a PS3), simply, wrap your head around everything it offers, and really, it's always been priced at a steal. It's just that, not everyone needs that kind of steal presently.

it's true, in fact i'm reading and posting on these forums with my PS3 at this very moment! fancy that.

 

[SinisterDeath]

Not going to quote people, becuase you just have to read the posts to know who I'm reffering to.

Every 360, in its first 2 years, Sold at a loss.
Every Xbox in its first 2 yeras, sold at a loss.
Every Ps3/Ps2/PSX, in its first 2 yers, sold at a loss.

This is the nature of the Industry, they get there money through Game Sales, not the hardware.

Think Cellphones.
You really think that cellphone costs only $80?
NO!
They re-coup there costs because you the retarded consumer, pays 2x the cost it would actually cost to use your cell, every month!
Thats why it costs you nearly $600-800 to unlock your high-end cell phones!

They make back what they lose, probably 3x that once your contract is up. And even then, you can't get it unlocked without first giving them the $600. Or they gimmick you into buying a new 'phone' by upgrading your plan.

Similar concept, different medium.

Game discs don't cost $60 to make.
360 game dics are something like, $3 for discs, case/paperwork, materials, labor, ect. And thats a very liberal.
Ps3 blu-ray discs are closer to probably, $15 to manufacture.
The rest of that money, (about $50 of that $60 is what they sell the games to retail at) so your really looking at about $47-35 in 'profit', not including how much it actually cost to make the game. And you know at least some of that is going directly to sony/microsoft to be used on there console. (The only one that doesn't have to pay, is For PC only games, this is also why digital distribution is being pushed. No retailer like walmarts eating up the profit margin, Everyones getting an extra $10 out of it)

Figure every game over $20M budget needs to sell at least 2M units to recoup costs. on development, its pure profit for sony on that front. Minus the free-adverts they give to the devs, if the games 'hot'.

360 starting earning a profit on the games... Last year?
The Ps3 is still a Year Behind the 360. That means they are now, that much closer to getting to the profit margin that 360 was a year ago. And Ps3 is already catching up on the 360 in sales.

Consider the fact that the PS3 and 360 are a year apart, and if you go back a year on the 360 and comapre those sales to ps3, They are at the same levels, albit the PS3 has higher spikes in different months than the 360. (Ps3's uncharted 2 = big spike.)
Factor in how much they lost per console with that 1 year slow down.
Also consider that the PS3 cost nearly 1.5x more than the 360 did at launch, and is 'still' keeping up with the units the 360 sold for 1 year behind, and now the PS3 is just as cheap as 360, 1 year behind the 360, and the 360s reaching market saturation already. Before PS3s price cut, they were reaching market saturation AT that price range, but also consider the state of the economy, and the PS3 is still selling well.


As for PSN having a subscription fee, they've been talking about it alot lately, but its not like 360.
360, you need a sub just to play any game online.
Sony stated if they go that route, You'll still be able to play the games online, you'll still be able to download demos, movie trailers, ect. Anything thats free now, you can still download.
The difference would be, what you'd get with that subscription.
Aka, premium 'content' you get 'free' with your subscription.

Like, Episodes of Core, 'free' with yoru subscription. Instead of having to buy them all. That kind of thing.
They might have 'demos' release a week early for premium users over non-premium users.They might have 'free' movies like 'netflix watch now', with a premium sub. Might include 'exlusive content' only available to premium users, stuff that you can't 'get' for 'free' with out it.

Perhaps they might even have 'Betas for premium members' like with Fileplanet.
But you won't require a sub to play an online game, online.

That is the 360s failing right there.
Got netflix?
To bad, you need a gold account to watch it online.
Got Halo 3? WAnt to play online? To bad, gotta pay to play online.

PC/PS3/Wii, got an online game? You can play online without any fees! With less LAG! (Dedicated Servers FTW)

Only difference is, services you have to pay for... MMORPGS, Netflix, you have to pay twice for on 360.

 

[Booze Zombie]

Took them long enough.