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PS3 Manufacturing Costs Down 70 Per Cent - Report
Sony executive VP and chief financial officer Nobuyuki Oneda has revealed that PlayStation 3 manufacturing costs have been reduced by around 70 per cent.
“The cost reduction since we introduced the PS3 is very substantial and this is on schedule,” Oneda said during a conference call following the publication of Sony’s first quarter financial results.
“We don't disclose how much of the PS3, specifically the cost deduction was achieved during the past two years. But that is on schedule,” he noted, according to Total Video Games. “About 70 per cent, roughly speaking,” he added when pressed.
According to the report, PS3 manufacturing costs could now be as low as $240 (£146) per unit, potentially paving the way for a price cut.
In its first quarter financial report, released yesterday, Sony announced that PS3 sales were down year-over-year from 1.6 million units to 1.1 million. During the same period, software sales declined from 22.8 million units to 14.8 million. While Sony has stated on numerous occasions that its priority is to turn a profit, even at the expense of increasing console market share, the company is aiming to sell 13 million PS3s this year. Lazard Capital Markets analyst Colin Sebastian believes a summer price cut will be necessary to hit this target, while Sterne Agee analyst Arvind Bhatia said recently that Sony will likely cut the price of the PS3 by $100 in mid-August to coincide with the release of Madden NFL 2010.
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If a PS3 price cut is coming, folks... it won't be announced until the last minute. Why? well - every day someone buys a PS3 for the current cost is a day the price point won't drop. Should those numbers REALLY tank out, the price will drop sooner than later.
Granted, Sony could be trying to hold out until that slim model PS3 gets produced in numbers enough to fufill demand, but that's quite tricky a guessing game to play.
Unless they started pre-selling them direct with the possibility of current users trading up for a slim model at a steep discount (with a pack-in game/blu-ray deal and % off deal for any upcoming motion controller)...
(hint, hint)
If they're making so much profit on each console then why did Sony’s networked products and services division, which houses the PlayStation unit, report an operating loss of 39.7 billion yen ($418m/£254.2m)? Perhaps the original manufacturing cost was way more than anyone thought but these figures don't seem to add up.
Still, it's looking good for a price cut if Sony themselves are saying it's this much cheaper to produce.
No matter how you swing it if MS sold only 100,000 more than the PS3 at there respective pricepoints theres something wrong and its not wrong with Sony , Im fairly certain that with a 100 price drop and a PS3 slim your gonna see the 360 fall off the charts. I know 6 ppl myself that are waiting for a price drop to pick up a PS3 , not to mention the growing trend of bluray uptake it seems to me that Sony might win the marathon after all and ALOT of analysts seem to agree also.
I love how the press love to spin things. Yesterday it was all about how badly Sony were doing. Now today it seems that Sony are making $200 currently on every PS3 sold.
Now conder than Sony came within 100,000 units of matching Xbox sales last quarter (1.1m Ps3, 1.2m 360), and Microsoft have already had their pricecut, lose money on the cheap models, and don't sell too many of the expensive models, who do you REALLY think is having problems?
As much as all you fanboys that want a pricecut, it 'aint gonna happen, or at least it does not need to happen, as clearly Sony can near on match the 360 sales, and make a tonne of profit, whilst Microsoft make loose change.
Seems to me, Sony have the choice, they can take the respectable sales numbers, and great profit margins, OR do a price cut and get a large boost in sales numbers.. Nice place to be in. Rather that than Microsofts place right now, "did a price cut, and still nearly got spanked by PS3".
It's also worth pointing out that PS3 1.1m was SOLD and Microsoft's 1.2m was SHIPPED! Read the financial statements, Clearly Microsoft are cooking the books...
Microsoft:
http://www.microsoft.com/msft/earnings/FY09/earn_rel_q4_09.mspx
"We shipped 1.2 million Xbox 360 consoles during the fourth quarter of fiscal year 2009, compared with 1.3 million Xbox 360 consoles during the fourth quarter of fiscal year 2008."
Sony:
http://www.bloomberg.com/apps/news?pid=20601080&sid=axhzsmkpSGp0
"Sony sold 1.1 million PlayStation 3 consoles and 1.3 million PlayStation Portable machines in the quarter, down 31 percent and 65 percent respectively from a year earlier."
The cost of manufacturing the Xbox 360 are cheaper than that of Sony, they had a full year advantage and its only logic that its cheaper to make a 360 than to make a PS3. Don't you agree?
A 100,000 units more means an extra 100,000 people ready to buy your software where both MS and Sony get royalties from third parties. Don't you agree?
Finally the press releases from Nintendo, Microsoft and Sony read something like this MIcrosoft lost money, Sony lost a lot of Money and Nintendo didn't make as much money as before but still made big profits. Seem like Sony is having more trouble. Don't you agree?
"Seems to me, Sony have the choice, they can take the respectable sales numbers, and great profit margins, OR do a price cut and get a large boost in sales numbers."
If you think that that Sony is experiencing "great profit margins", you're sadly mistaken. PS3 sales, year/year decreased 31%! Furthermore, Sony cut its losses in half this year, from $124 million to $66 million. Do you really think they're experiencing great profit margins with $66 million in losses?
Furthermore, any Sony profit margins you speak of exist at the cost of installed base. Because of that lack of installed base, you have individuals like Bobby Kotick posturing that his company (Activision) will reconsider supporting the platform.
I'm glad to see lower production costs on the PS3. Now, pass those savings along to your potential customer base. Then, the revenues will come in. The profit is in the software, not the hardware.
Shipped & Sold would only be different if it were a manufacturer's numbers versus a retail tracker. Consoles are purchased by a distribution company & then shipped.
Besides, Sony said they were losing money in record numbers; you wouldn't really need to spin that. I don't think that they would release this information to show people they're in a good place for profits. The other companies could spin this horribly - We're willing to take less money because we care about our consumers....blah..blah
I get the impression that he's releasing this statement as a point of pride. His company has managed to get the most advanced game system ever down to a competitive price-point through skilled cost-reduction techniques!
That's how it sounded to me, & if he managed to get an $800 console down to $240, he should be proud.
Sony fanboys don't necessarily want a price cut; they already have PS3s.
Well here's some numbers (North America only) that might enlighten your view a little bit on just how good/bad MS and Sony are doing sales-wise so far this year. Now, this is calendar year, not fiscal so it won't match up.
360: 1st half 2009- 1,620,600
PS3: 1st half 2009- 1,119,900
That's a little over 500k for 6 months (or 83,454 a month) more units MS is SELLING in the North American region than units Sony is SELLING.
Also, Sony has been just as guilty of the "shipped" and "sold" verbage abuse. Plus, retailers only have so much room, how many of MS' 1.2 million shipped 360s can honestly still be on the shelves? Especially if the sales numbers for the 360 are doing so well, it would be strange for them to have such high sells but somehow the units they "ship" are mysteriously on the shelves still.
Mate, why do you always look at North American numbers and make these kinds of assertions? There's no point looking at one part of the picture and drawing conclusions. If you want to make sales comparisons the only sensible thing is to look at worldwide figures. What do isolated sales statistics for one region tell us that's of any use?
Well the reason why I use North American numbers is because it's a good barometer for the rest of the world minus the relatively smaller Asian market. The North American market is the largest gaming market in the world; I would hardly call that "isolated". And accurate up-to-date worldwide numbers are pretty hard to come by.
The 360 is leading by over 7 million units (last I checked) worldwide, a lead they've built since the PS3 launched (which was only at about 2.2 million when the PS3 was released). I'm citing these numbers from memory so I could be off somewhat, but I don't really care. I rarely play my Xbox any more anyway (damn family and responsibilities).
yeah, no offense but your memory's a bit off. the market for games in the US is just barely larger than Europe, where the PS3 generally sells more. couple that with "the relatively smaller Asian market" and you have a picture where the 360 and PS3 are neck and neck worldwide, and have been since the PS3 launched in '06. Microsoft pretty vocally pounded their chest at having shipped 6 million 360s world wide a month prior to the PS3's relesae in 2006, and they went so far as to say they were confident to reach 10 million by Dec '06.
http://news.teamxbox.com/xbox/12113/Microsoft-Confident-to-Meet-Xbox-360...
as of Q209 the difference between both stood at about 6.5 million.
http://news.teamxbox.com/xbox/19462/Xbox-360-Sales-Up-30-Percent-in-Marc...
http://www.scei.co.jp/corporate/data/bizdataps3_sale_e.html
in other words, the 360's lead remained relatively unchanged. you see how just looking at one market (the US) skewers things?
Mike,
Haha.
Elex,
Well you're right, the 360 has been pretty neck and neck with the PS3 for a while now (which I've mentioned before). Again, I was citing US numbers with the 2.2 million to 7 million lead increase. And you are right about the US being only slightly larger than European market. I do think the PS3 does slightly better in the European market and 66% better in Asian markets, but the 360 is destroying the PS3 in the US where it still holds a 2:1 lead over the PS3. Put those three markets together and you get neck and neck like you said. But unfortunately, Sony won't make up those 7-8 million consoles being neck and neck.
Nice post Elex.
ooooh nick he really got you there tooshea my good man lol.
Well, I guess it's needs to happen now. They just pulled their last excuse, & I can't believe Sony would say, "We just messing with you. It doesn't need to cost as much as it does."
This is the best actual evidence of a price cut I've seen.
What's interesting is that Howard Stringer said just last month that Sony would lose money on the PS3 with ANY price drop at that point in time. Maybe this number reflects potential cost savings from the rumored PS3 Slim and not the existing model.
So if the estimated costs of the original PS3 (most said it cost Sony $800-900 to make) are reduced by 70% that would put Sony's costs now around $240-270, right?
Personally, I still think they'll only drop the price in the Fall (probably announce it during TGS) by $50, but if this quote and the estimates are accurate a $100 price drop is feasible.
Lets start at the beginning the price for a Playstation 3 is £289.99 a Blu-Ray is a disc system you can not download Blu-Ray.
And you want to play a second hand game for a £10 I bet sony is craping in there pants.
How can dvd 480p be better the 1080p DVD vs Blu-Ray
right...MGS4 is £10 now. I just want the stupid PS3 at affordable £199 WITHOUT a blu-ray.
I'm not paying £399 for the machine so I can play a £10 game. And whats the point of blu-ray when ur not going to download blu ray movies. Im not waiting overnight to download spazzy PotC in HD. Give me ripped DVD quality anyday.
Ok, so give the game store 10 pounds, and give me 20. Now you can spend 400 to play a 30 pound game. Better?
But this came up when Kojima was discussing the rumours about mgs4 being ported to 360 didn't it? MGS4 would take up 6-10 DVDs was the conclusion if memory serves.
So even if you could somehow get a PS3 with no blu-ray, you certainly couldn't play your 10 quid copy of MGS4 on it.
Where have we heard about PS3 price cuts before? As ever, I'll believe it when or if it ever actully happens, but I think this is the evidence Sony needs to push a cut through as those sales figures must be hurting them.