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Report: PS3 Hardware Almost Break-Even
When Sony's PS3 launched two years ago, even with its relatively high price tag, the company lost a significant amount of money on each console sold.
But a new BusinessWeek report featuring an iSuppli teardown of the PS3 finds that the total cost of components for the console is now $448.73 versus the $399 retail price tag.
The console is still losing money per unit sold, but not to the extent that it was initially. In 2006, iSuppli had figured the PS3's bill of materials to amount to over $840 for the 60GB model and $805 for the 20GB model, which retailed for $599 and $499, respectively.
Game console makers Microsoft and Sony initially lose money on hardware, but offset costs with first- and third-party game sales.
iSuppli believes PS3 hardware will break even in 2009. "Every time we do a teardown, it's sort of backward-looking," said iSuppli's Andrew Rassweiler. "Sony is one step ahead of us and probably has plans to re-spin the hardware to reduce the costs yet again."
Sony has reduced the total number of PS3 parts from 4,048 to 2,820, the report said. iSuppli estimated the cost of the PS3's Cell processor to be $46 currently, down from $89 at launch. The console's Nvidia GPU is now $58, down from $129 initially.
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The PS3 and 360 are both expensive systems because to get all the HD goodness that these consoles provide a HD TV is essential.
Running both consoles through a standard TV defeats the purpose of both systems as the picture/graphics aren't any greater than the previous generation of systems.
I don't own a PS3/360, but to justify the systems i'd need to blow £500+ on a new TV and that just ain't happening.
Nintendo certainly did right with releasing a no frills console with a innovative controlling device as they knew not everyone is going to shell out all this bread on a new TV just to play games in HD.
Nintendo say when HD gaming starts, not Sony or Microsoft.
Whilst a price cut would be great... i think a more desirable move would be to include bundled software with the console.
Despite the Wii making money on every unit sold, its secret lies in the bundled software of Wii Sports. The number of people that buy the console for that specific game alone must be huge! If they never buy another game again that's ok with them (and Nintendo because they already made a profit on the individual sale of the console)
The PS3 only seems to come with software added by retailer outlets - increasing the original RRP making it an even more expensive option. The deals are prescriptive and often include games you don't want.
But if sony could sell the PS3 including MGS4 or LBP (or whatever key software) within the price of stand alone pack surely this would be a good thing?? I know people who finally ditched their PS2 and bought a PS3 just for GTA4... (I guess it does beg for a comparison of the "hardcore" gamer Vs. "casual" gamer if one looks at the Wii sports as a valid reason?)
I am not convinced it necessary for Sony to have a huge price drop. Perceived value after all can be huge thing. People may well assume Sony's machine to be the best because it is the most expensive. It does need to do something though to compete with xbox's aggressive price re-structure. I personally think that quality software IS the way forward. And Sony should not lose exclusivity on DLC for multi-platform games such as GTA4... things like that can be deal clinchers!! AND for the love of god they should not be delaying street fighter games on PSN!!
it's all about the software support... (Sega Saturn anyone?)
Personally I'd prefer to remove any bundled software if it meant lowering the price. That way I can put the money that I have saved on the price of the console towards the titles that made me want to buy the console in the first place.
I don't really think that the 120m people who bought PS2's need to be sold on quality software. They know that Playstation means quality already. Because of the success of the PS1 and PS2, Playstation is a respected name with consumers and in that respect, I think Sony have the quality aspect in the bag by a mile.
Outside the hardcore market (in this context I mean people who consistently spend a lot of their monthly disposable income on gaming), people generally don't have loads of cash to spend on games and I suspect a large part of the console market (in the UK at least) is made up of parents buying consoles for their kids, 20 something guys who want to play the latest version of PES or FIFA and students with limited cash. In that kind of market, people will be concerned with price first and foremost.
So I reckon that If Sony want to shift more PS3's then they have to bite the bullet by cutting the price and then get serious about advertising the price drop properly. Pure and simple.
Until then I don't think anything will change for Sony.
Agreed.
You're right about advertising!!! I have often felt very suspicious of a multi-platform game advertisement that is followed by the voiceover; "available on Xbox" and a screen showing the Xbox and it's prices...
Where is Sony's response??
I definitely have seen advertisements for 3rd party games, multiplatform games with the PS3 logo, like Nick was saying, it's a result of the platform manufacturer/owner putting money in to help with advertisement costs for 3rd party games. It's a smart move because the sales of a 3rd party game for their console definitely benefit Sony/MS, and if it's a marque title, they also potentially benefit from an association with the title to their brand. Nintendo is the only company that does not form advertisement partnerships.
I believe in those situations MS covers some or all of the advertising cost so they get to have the 360 logo pop up after the game. I also think that is a win-win situation because not only does the publisher get a discount on advertising costs, but the game is essentially being advertised for the HD console with the larger installed base. When the PS2 was the thing, the games rarely had the xbox 1 logo after the adverts. Times are a changin'.
I think that Sony is already breaking even. I bet they can get some of the components cheaper then those previewed by iSupply.
Plus, don't forget that in Europe a PS3 costs 400 Euros, that's about $600.
In Europe at least, they are already making money out of it. And I'm not forgetting that the retailers also get a piece of the pie too.
Since when 50$ is almost zero? It's still a lot of money before they break even.
JC
I completely agree. $50 is far, far away from "almost breaking even". There are shipping costs and everything else involved, too. Multiply that $50 loss by however many systems, and it's a huge hit. Nintendo, on the other hand, makes $5 per Wii, which is still not a lot, but it's enough. They're not exactly printing money due to hardware sales like everyone seems to think, but even the softest-core Wii-user will buy at least one game, and that adds up to a lot of sales.
I'd be interested to hear figures on Microsoft's manufacturing costs.
Sony is still in a sadly precarious position. They need a price drop, but when they're already losing $50, it's tough. They might have to take a huge risk to make the PS3 a lucrative purchase, I fear, either with aggressive pack-ins or aggressive (some say suicidal) price drops. Their focus has to be on the games, too. It's no longer the cheapest Blu-ray player, and that takes a lot of wind out of the sails. They need to stop touting its multimedia capabilities and really trump up the exclusives, not to mention strangle third-parties into making the PS3 versions of multiplatform titles superior.
That would get things back on track, though it's far from a simple recipe.
In my opinion Sony would need to announce a price drop of $50-100 in 2009 (maybe in February, before Killzone 2 launches). It's even possible, that a $50 price cut would do no good fo the PS3 sales, because the Xbox 360 Arcade can already be bought for $200, and the PS3's price (after the -50$) would be yet $350, which ain't so great..
The $200 Xbox 360 is a bit of an illusion, though, since any actual gamer will also need to purchase a hard drive, and depending upon choices, that can add a lot to the tag.
What the report fails to mention is the fact that the console is not being sold for $400 around the world. Assuming the figure of $450 to be true, Sony makes quite a profit on each console sold in Europe. The price there is 400€ which translates to $560. My compassion for poor Sony ends there.
iSuppli does not look that professional to me, omitting the international metrics of Sony's business like that. Adding up all the numbers from the world and considering the prices at which all those consoles are sold for, would reveal that on average Sony is selling a PS3 for more than $450. Even if they are making a loss locally, they are not making a loss overall.
Just for the sake of clarity, it's not unusual for a console manufacturer to lose money on each console sold -- in fact, it's the norm; except for nintendo, ever since the gamecube.
ps3 did begin out at a very unusual loss, however...even in spite of its exorbinant consumer cost.
iSuppli teardown of the PS3 finds that the total cost of components for the console is now $448.73 versus the $399 retail price tag..........................and the fucking REST ! labour cost of assembly ? cost of shipping ? cost of packaging ? profit margin for retailer ? this is conponent ONLY no other overheads i'd love to know just how much Sony does lose on each unit with ALL overheads .
Exactly. Saying they "only" lose $50 is rather misleading.
Why worry about that? Those costs are probably marginal. I would be hard pressed to say that those costs are anywhere close to $50 per console.
So why worry about it?
playstation 3 in croatia cost's 630 dolars so dont fuck about and be happy about prices!
and also you get iphone for 200 dolars and we have to pay it 1400 dolars!!!
People tend to forget that the world is not only about the USA. In portugal a PS3 costs 400 Euros (about $600) just like in croatia. Sony is making money on the PS3 in Europe for some time now.
I bet this fiscal year, SCE will show some profit on the PS3.
How many units do you think they sell in those countries, not many. The US is the main battle ground not Portugal and Croatia. Also Sony is not making money there either, after import taxes and currency conversions it will work out to roughly the same.
"How many units do you think they sell in those countries, not many. The US is the main battle ground not Portugal and Croatia. "
Wait... what? Bit of a erroneous statement there, Portugal and Croatia are part of Europe, and total HW sales in Europe are pretty much the same as the States. Backed up with facts:
Total HD console HW sales for 22nd December 2007 to 20th December 2008
Total - 22,541,005
America - 9,832,846 - 43.62%
Europe - 9,083,278 - 40.29%
Japan - 1,391,247 - 6.17%
Australia - 577,782 - 2.57%
Other - 1,655,852 - 7.35%
This is what really annoys me when people go around touting NPD figures like that is the only part of the world where significant numbers of consoles are sold. I wish some people were less ignorant.
Yeah and Croatia and Portugal are the big sellers of europe, get real.
Thats like singling out states from US FFS!
I've looked back through your previous comments and have come to the conclusion that there is no point in replying to your posts.
Except that these aren't like US states, they are countries with their own pricing.
If you want to talk about profits in Europe, it's probably best to see what the prices are like in the UK. The UK is without a doubt Europe's biggest console video game market. That's not to belittle other European countries, it's just a fact that the UK has by far the biggest slice of that European sales pie.
Canadian sales are included in the NPD numbers, and I have never interjected when the NPD numbers are sited as US sales, because the fact is, even though for its population, Canada has a massive consumer market for games, music, movies, etc, still its market is a drop in the hat compared to US.
It probably would've helped Sony if Canada was a bigger market, as I've heard that this holiday season, the PS3 edged out the 360 in console sales.
I live in the UK bud, so I know what the prices are like. I have Europe broken down into Regions too (well as detailed as I could find). I don't do anything by half. :)
You're right UK accounts for 31.23% of total 360 & PS3 sales combined since they launched in Europe.
I'm not sure what point you were trying to make there though, sorry. I have not said that they are making a profit on PS3s as they are not, they use the Razor and Blade method the same as Microsoft, the only one that doesn't is Nintendo.
Interesting numbers, what's your source?
I guess if MS has only sold 12.4 million 360s in the US and Sony has sold 6.0 million PS3s in the US but their worldwide numbers are 26 million and 18.8 million respectively that would mean the the remaining consoles had to be sold elsewhere. ( http://vgsales.wikia.com/wiki/NPD_Seventh_generation )
It is interesting to note however that the US accounts for nearly half of all 360 sales (48%) when the US only accounts for about a 3rd of PS3 sales (32%).
Indeed! (I'm assuming that was a genuine interest, and not accusing me of making up numbers?)!
Numbers are straight from vg charts, and are worldwide sales not NPD! They are combined figures for PS3 and XBOX360 worldwide from 22nd December 2007 to 20th December 2008, I added the sales for both consoles together myself as I was trying to make a point about Regions and not systems.
I was thinking of writing a little article, so I have been playing with the numbers I have imported into Excel as It's interesting when you actually look at the breakdown across regions. People forget that Europe is just as big a battleground as the US.
When you start maniplulating the numbers to look at average sales per month since launch date etc, you also get some really interesting numbers.
No I was being genuine. Initially the numbers sounded wrong because I thought the US percentage was much higher than just a few percentage points over Europe but after I thought about US NPD numbers compared to worldwide numbers it made sense.
I know those weren't NPD numbers you were citing because NPD only covers US and you were clearly talking about worldwide (since you including Japan, Europe, etc).
What I did was took US only numbers from NPD and figured out the US percentage of 360 and PS3's worldwide sales which were a surprising 48% and 32% respectively. It seems the US is a much stronger region for the 360 when the PS3 seems to have a broader range.
Cool, just checking. :)
Yeah, whats also interesting is that this year, the numbers are very close between Europe and US in total console sales.
If however you look at the total since launch of the consoles it's a different story.
Total - 45,314,267 - 100.00%
America - 22,590,942 - 49.85%
Europe - 15,728,033 - 34.71%
Japan - 3,500,898 - 7.73%
Australia - 1,001,979 - 2.21%
Other - 2,492,415 - 5.50%
Much bigger difference between US and Europe, then we have to ask why.
Would including wii sales numbers shed a little more light on this difference?
I'm guessing it's mostly down to the fact that the consoles released later in Europe than US.
XBox released 22nd Nov 2005 in US and 2nd Dec in Europe
PS3 released 17th Nov 2006 in US and 23rd Mar in Europe
The month difference doesn't look like enough, but then PS3 is one XMas behind in Europe compared to US.
You're right in that the US is a much stronger region for 360, in the US for example, pretty much twice as many 360s have been sold than PS3s since launch, 15,333,471 and 7,257,471 respectivly.
In Europe however the PS3 is 459,341 behind the 360 even though the 360 was released over a year earlier than the PS3.
I think maybe the reason '08 has been much more even between US and Europe when compared to sales since launch is because Europe has been gaining as of late. From what I've read MS sees Europe as the new battleground and has been trying to make gains over there (and they have according to MS).
Hmm, don't know if including Wii numbers would make much of a difference considering it is selling very well everywhere. And I wouldn't imagine like you said that a one month launch delay would make that much of difference for the 360 sales but I do think the European PS3 launch delay probably did affect the numbers more.
The US sales-to-date numbers you quoted for the 360 and PS3 seem a bit bloated when compared to official NPD numbers (12.6 million for 360, 6.0 million for PS3 as of November's numbers according to NPD). Either way, you're right when you say twice as many 360s have been sold as PS3s. I think the PS3 catching up to the 360 in Europe is indicative of Sony's brand loyalty in that region. It'll be interesting to see how '09 plays out and how much of a sales difference there'll be when Sony inevitably lower's the price of the PS3 by 50-100 bucks.
Those are figures available up to 20th December, obviously NPD is not available for December yet, but I will be updating my numbers then. It's pretty accurate though.
Where are you getting your NPD data from out of curiosity? The more accurate the info the better I say!
I get them from a wiki and they always match what is released from sites such as edge, gamasutra, ign, planetxbox360, PC world, gamesindustry.biz and pretty much anyone else that reports on NPD numbers. Its actually a good site with a lot of breakdowns and numbers for other generations as well.
http://vgsales.wikia.com/wiki/NPD_Seventh_generation
In other news, Nintendo laughs its way to the bank...
I just bought the ps3 as a blu-ray player partially out of pity. Maybe I wasn't helping their cause. I got a couple games like Resistance 2 and LBP as well as Dark Knight on Blu-Ray.
I know that GameStop isn't selling the thing without a profit. Sony must be selling it to them for $375 per console at the most.
But who is this random site to say how much it costs to produce these parts. Don't they save money by buying in mass? Doesn't labo(u)r and transportation go into the cost too?
They most likely did figure in mass cost. That is probably where they got such low figures. AS I said above, the labor, packaging and delivery costs are probably marginal and nowhere near $50.
So $248 dollers to cut before they can match the 360's price, ouch. Sony are screwed this generation and deservedly so, horrible hardware and no software, no way back.
The PS3 will never match the 360 price, simply becasue we are talking about diferent hardwares. Why should a Ferrari cost the same as a Crysler?
I don't understand this, the ps3 still suffers from inferiour multiplatform titles and i have yet to see anything on ps3 that the 360 cannot match. Gears 2 is still the best looking console game out there.
My vote would go to Rez HD :-)
If it performs almost exactly the same?
Hmm, bad analogy. It'd be more like a Ferrari to a Corvette Z06 same-near same performance in the Z06, but at a fraction of the price.
Errr that "horrible hardware and no software" line is about 2 years out of date.
Invader Phlemn is correct on all the things that were mentioned.
Imagine how Sony must feel about how their small supply of exclusive games like Resistance 2, Little Big Planet, Valkria Chronicles, and Haze have sold so poorly. Resistance 2 was released within one week of Gears of War 2 on the Xbox 360, and Gears of War 2 outsold Resistance 2 by a ratio of over 10:1. That means for every ten copies of Gears of War 2 sold, only one copy of Resistance 2 was sold...And Valria Chronicles was outsold by Gears of War 2 by a ratio of 100:1...and we all know what a BIG disappointment Little Big Planet was.
Reasons like that are why Sony wasn't able to lower the price of the system for Christmas of 2008, and will instead have to wait until early 2009.
One other reason is because of the relationship between the value of the dollar and yen. The fact that the dollar decreases in value and they yen increases in value really hurts Sony a lot, since they are a Japanese company. This is one of the reasons why Sony is laying off 8,000 full-time employees, in addition to 8,000 contract/part-time employees.
Oh my god, you just overdid yourself again. Thought that you can't raise the idiocy any more, but you surprise us every time, parrot.
Breaking: The Bible outsold Gears 2 by a bahzillion to 1. (Don't say you won't surpass that, either.)
So why are there vs. sales here again? Its a SONY only TOPIC... IMO on Topic is that SONY did a great job cutting significant amount of cost per unit, and we can expect a price cut. Great news... Why is it so important that others have to hear how GOW has done?
How has the SYSTEM done in Japan is what i might ask you? IMO the PS3 has done ok. So @ 200 the X360 better sell...
I agree Monkey (I know that's not your name, but that's what it looks like).
We all know some of Sony's big exclusives didn't sell strongly and a direct comparison to one of the 360's best selling games was totally unnecessary in the context of this story.
Kim, I'm all for good 360 news and comparisons, but only when it’s warranted.
However, Sony still is not there yet. I think it is safe to assume Sony is going to lower the price of PS3 to around $300 over the course of 2009. Which means that at $448.73 bill of materials, they are still losing $148.74 per system sold. At those prices, a $300 price point is good for the consumer, but is actually still pretty bad for Sony.
I do expect the rumors about a 45nm PS3 coming in 2009, to bear fruit. And that should knock at least 1/3 (if not more) off the difference between the bill of materials, and the retail. That is going to help Sony's overall position out much better, but it is still going to leave them losing money on hardware, which in turn is going to effect how well they can compete with Microsoft and Nintendo (both of whom I have read, are now profiting on hardware) on retail pricing. So as long as Sony continues to keep PS3 prices semi-competitive, they may still be looking at the prospect losing money on the hardware well into 2010. However, I would expect that by holiday 2010, they will finally be able to match a true competitive price at retail and have that equal to their bill of materials.
Also keep in mind, getting to where the bill of materials = the retail price, is only halfway to nixing Sony's numerous monetary problems with the PS3. They still have to make up for years of losing money on the hardware. It is said to be anywhere between 16 million to 18 million PS3 units on the market today, and if iSuppli tear downs are accurate, Sony has lost anywhere from $305 to $48.74 on every last one of them. If software on the PS3 were selling like it did on the PS2 or the PSX, then this really would not be a problem. However, software sales on the PS3 are . . . disappointing. 2008 was really supposed to be the turn around year for the platform, yet with the exception of Metal Gear Solid 4, none of the PS3's exclusives for 2008 (Haze, LittleBigPlanet, Resistence 2, Valkyria Chronicles, etc.), have sold very well. Unfortunately, this has been a big problem for the PS3 for some time now; it's not a new problem that has just popped up in 2008. As a result, the PS3 has the lowest attach rate of any console this generation - even lower than Wii's. It's as if everyone really did buy a PS3 just for the blu-ray player. And while that is well and all for the blu-ray format, that is very bad news for the Playstation format. As Sony needs the money from video game sales, to make up for all the money they lost selling PS3 at a loss, not to mention the money spent on the R&D that produced the PS3. Software sales are also how Sony was supposed to eventually turn a profit from the PS3. At the rate things are headed, Sony will be truly lucky if they can break even on PS3 by the time the launch the PS4.
So while the news from iSuppli is certainly great news for Sony fans, Sony still has a lot of work ahead of them before they are out in the clear. They have to continue to reduce the bill of materials on the PS3; they have to reduce the retail price of the PS3 to truly competitive levels with Wii and Xbox 360; and they have to find a way to convince existing PS3 owners to actual start buying PS3 games; in enough quantity to actually offset all the loses Sony has taken since they first started working on the system, no less.
Glad to see them cutting costs in a positive way. I can't wait to see them cut costs enough that they can confidently lower the price of the PS3. The price is still the highest hurdle keeping me from buying one. But I certainly don't want them to be stuck in a perpetual red cycle trying to cut the costs enough for me.
By the way, other hurdles include lack of an HDTV and few games that interest me.