PS3 costs cut in half
- Posted January 11th, 2008 at 16:39 EDT by
- 9,065 views
- 40 Comments
With the recent price drops and all the shuffling of SKUs, the PlayStation 3 seemed like it would never get close to being profitable for Sony. Although still not making a profit on each each system sold, they are getting considerably closer as Sony has announced that production costs on the PS3 have been cut in half.
The generable rule of thumb in the gaming industry is that when a console is first launched, the company is expected to sell it a loss and eventually make up for this loss through exclusive licensing and software that will draw gamers to purchase the system. Although it has been proven to work in the past, the PlayStation 3 just seemed way in over it's head as Sony had gone on record saying that they were losing roughly 200 USD per system sold.
Originally, production costs of the PS3 were around 800 USD when the system first launched, but through different cost cutting maneuvers, Sony has been able to bring down the production cost of the system to a reasonable 400 USD, almost the same price of the newest 40GB model. Some of the cost-cutting moves have included shrinking the chip sizes, re-evaluating parts (like removing the Emotion Engine for the latest 40GB model) and various other design tweaks.
Last week Kaz Hirai expressed to the media that the PlayStation division of Sony, specifically the PS3's division, is expected to turn a profit in 2008 as opposed to the losses experienced in 2007. Thankfully the PSP and even the PS2 have maintained solid sales and the gaming portion of Sony has been staying afloat. Now that production costs are below the retail price, this also allows some breathing space to bring the price down one more time without disrupting profits. Although this price drop may not come soon, it could be expected around the holidays of 2008 when Microsoft and possibly Nintendo could be eyeing a price drop for their respective systems.
Sony has also benefited from Warner Bros. recent defection from HD-DVD to Blu-Ray as investers have raised the value of Sony's stock by 4.1%.
Comments
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McGriddles |
McGriddles- 4:41pm GMT - January 11th, 2008
- 1
great! maybe sony can start making some mad money off the ps3.
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Trainstop4
- 4:56pm GMT - January 11th, 2008
- 4
Haha Clarky, you're not even fast enough to get a 1st....Uhm, whoops!
As for the price cut, that's cool for people that don't have one, hopefully that will entice others to get one now!
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Ezcobar411
- 5:06pm GMT - January 11th, 2008
- 5
This is good news for Sony. Obviously Hirai knew what he was talking about
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Stev-o |
kingboy941- 6:20pm GMT - January 11th, 2008
- 9
well tats good news,but sony has to stop minimizing and taking out things from the ps3 sure the price is going to be low,but people expect an awesome futuristic gaming system and all they're doing is takin away usb slots,backward compatability,and now shrink the size of the chip??leave the ps3 the way it is and jus drop the price
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Staticneuron |
Staticneuron- 6:26pm GMT - January 11th, 2008
- 10
I really want to see that information. Sony went on record to say they lose $200 per console? When? Sources?
This has happened before. People have used the words of Soichiro Fu kuda, an analyst at citigroup, as fact. This is as valid as one of pachters opinions.
EDIT: Actually these are the words of Kota Ezawa. Here is a more informative source
http://www.businessweek.com/globalbiz/content/jan2008gb2008018_681920.htm?chan=top+news_top+news+index_global+business -
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1solidsnake |
solid1snake67- 6:35pm GMT - January 11th, 2008
- 12
sweet. if price goes down for this holidays for x-mas. i'll probably buy a brand new ps3 and give my buddy my 60 gig as an x-mas present. if he doesn't have one then.
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Gameware336 |
Tyrial- 6:38pm GMT - January 11th, 2008
- 13
@Static i dont remember where but it was said they would be losing around $200 USD a bit before the system launched..i remember reading it here actually
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Dark_Halo34 |
Dark_Halo34- 6:55pm GMT - January 11th, 2008
- 15
at least sony is focusing on the system not money lik the azzholes at microsoft
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Bingepurge_99
- 7:02pm GMT - January 11th, 2008
- 16
last i heard. M$ still isnt making any profit off of Xcrap hardware. thier still losing on every system sold.
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Naucious23 |
Naucious- 7:10pm GMT - January 11th, 2008
- 17
the consumers are getting a bang for their buck right now I dont know why they need a price cut, people need to understand you cant get everything for free demanding so much from sony..... price cuts...... updates......games.....lawsuits, but theres no problem when Sony is losing money just to please everyone, Soon sony wont be able to keep up with all these complaints and law suits and thn as a consumer where are we going to look for our gaming? Can we say XBo360? uhhhh..... i shudder the thought of that happening.
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Ferre
- 7:12pm GMT - January 11th, 2008
- 18
@ Stev-o. What you wrote didnt make no sense! shrink the size of the (CELL)chip is a GOOD thing! The performance remains the same, it's cheaper to produce (so that Sony finaly can get some profit from selling tha PS3) and the chip takes less power = less heat = less fan noise! Now why shouldn't they do that? ;)
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InfernoReaper |
GrimDarkling- 9:28pm GMT - January 11th, 2008
- 24
I don't think Sony should wait for the 08 holidays. Maybe just before summer (the the northern hemisphere) when everyone is getting out of their schools and more time off. By then they'd have a very nice lineup of games out and even a small cut like $50 would still jump the sales up. Same price for an 80GB PS3 and a CrashBox3FixMe Elite.
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Sniperwithacause |
Sniperwithacause- 10:33pm GMT - January 11th, 2008
- 28
Now with all this being said. Why would anyone want a "XBOX3FIXME"?
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djrussell |
djrussell89- 11:24pm GMT - January 11th, 2008
- 29
It wouldnt suprise me in the least if Microsoft annouced a new system (Xbox 3?) late this year or next year some time. Just like they did with the original Xbox. Cause to them its all about who gets ahead first - and they wouldnt have a problem in the world screwing over the 360 just so they could get a headstart on a new generation. Afterall they did it before.
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bloodwarg |
bloodwarg- 5:11am GMT - January 12th, 2008
- 32
glad i got the 60gb ps3 when released as the new ps3's will be half as good.
good for people who couldnt afford ps3 in past as this will probably lead to further slight price drops and why should they worry about losing money on each console there making money on the percentage they get from game developers for each game sold and with kane and lynch(although crap) and call of duty 4( was going to get but decided to get unreal tournament 3 next month) topping a million sales this can only be a good sign that they break even on there consoles and make there profits from the games.
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MatrixSixaxis
- 7:14am GMT - January 12th, 2008
- 35
Show me the great titles...and I'll show you the money!!!!
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PS3-The Ultimate Machine
- 12:27pm GMT - January 12th, 2008
- 38
Man,Danny were you smoking weed when you wrote this article?Firstly,check your grammar man 'are getting considerable closer',shouldn't it be "considerably"?
Next the Emotion Engine chip had already been removed from the PAL 60gb ps3,and now has been removed from the 80gb SKU sold in North America,the only thing the 40gb lost was actually the GFX synthesizer(well that and two usb ports,and the ability to play SACDs) that couldn't be emulated by the ps3 components.Therefore it lacks ps2 BC,please make corrections to this thing.
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