Sony losing $240 to $300 on each PS3, 360 and Wii profitable

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Detailed analysis: http://www.isuppli.com/news/default.asp?id=6919
The gist of it: http://www.next-gen.biz/index.php?option=com_content&task=view&id=4222&Itemid=2
Dumbed down (IGN): http://ps3.ign.com/articles/746/746482p1.html


20GB ($499) PS3 loses $306.85
60GB ($599) PS3 loses $241.35

Xbox 360 lost about $125 per system at launch, but they now make a profit of $75 on each system. Wii currently makes a "slight profit" on each system.

"This does not include costs for the included controller, cables, or packaging."
 
MS seems to have been very cost conscious when they designed the 360, they ended up getting a lot of bang for the buck. $19.45 for the DVD drive, compared to $125 for Blu-Ray. The case and 'mounting cage' on the PS3 cost $53, the 360 case costs $22, and doesn't use anything analogous to a 'mounting cage'. Manufacturing costs are $40 for PS3, $6 for 360. The 'motherboard' (board, CPU, graphics, chips, etc) cost $500 for PS3, $204 for 360. This is the expense that goes down the most with time, and 360 has a year head start, but I'm not sure if they'll bring that cost down by 60% in a year.

The article is laudatory of the PS3 for giving you so much processing power, and for a loss. However, the article also states that PS3 has a lot of "exotic" hardware. It looks to me that 360 has a much more efficient design, PS3 is a lot more complicated and more difficult to assemble. Very much the opposite of what happened in the last generation. I think this bodes well for 360's ability to compete on price in the long term. PS3 might need a hardware revision on the level of the slim PS2 to really reduce costs, 360 was cheap and easy out of the gate.
 
Sony should have just cut out the middle-man and sold their Playstation 3s on eBay.
 
[quote name='Brak']Sony should have just cut out the middle-man and sold their Playstation 3s on eBay.[/quote]

Well, wouldn't the middle man be ebay? But that is a good idea.
 
Sony is out of their minds. They lose around $250 on each console and they won't be able to produce enough to actually sell many games (or movies, which I guess is what they're really going for) for at least a few months. And all because they had to put their blu-ray format out and hope it gets enough of a userbase to pull them out of their hole. I'd say that's more of a gamble than the Wii...

It's nice to see that the 360 is actually profitable, I'm sure their new cpu will cut into the profits some, but maybe they'll actually be able to make up that $4 billion loss last gen, eh?
 
The 360 is looking better every day to me. If they can keep up in the games department there will be no reason to get a PS3.
 
Well, if the cost of making a 360 can turn around $200 in one year, why couldn't it be just as close for Sony? In the end, if you accept that as possible, it really diminishes the "Sony is out of their minds!!!!" feigned outrage that is nothing more than the nom de jure around here anymore.
 
[quote name='Brak']Sony should have just cut out the middle-man and sold their Playstation 3s on eBay.[/quote]Could you imagine? If a major system launch occurred on eBay? I'm sure a company like Sony could pull some sway with eBay so that they didn't lose nearly the same % of commission on each system.

You might be onto something Brak... just maybe.
 
Hopefully when Microsoft makes the move to the 65mm CPU's in 2007 that are supposedly cooler and quieter they will also put HDMI on the MOBO.
 
MS is just a cheapass producer- using cheap parts for Xbox, the red ring probems with X360. Spend a few more bucks on your hardware.
 
[quote name='Grave_Addiction']Well, wouldn't the middle man be ebay? But that is a good idea.[/QUOTE]
Sony > Retailer > Consumer

Sony, via-eBay > Consumer

eBay wouldn't intercept the item for any profit, and Sony would be making money directly -- eBay wouldn't become a middle man; merely a tool for Sony to dispense their product straight from their warehouses.
[quote name='psiufoxx2']You might be onto something Brak... just maybe.[/QUOTE]
Probably not... ;)
 
Let me just expain something here in the world of buyer vs. Seller the seller is allways the better winner.

The food chain of how a product is made is the following if not diffrent.

Raw materials ( Minors in Africa/ Recycling of old parts )

Computer Science/Arcuterture ( the scientists people who comes up the design of parts. Like IBM, ATi, APPLE, )

*Assemblers( Labors in Chinas factories who litterial is working on a chain gang putting these things together to the sound of drums )..

Big Wig companies or small bussinesses ( who buys the parts from them )

*Assemblers( Labors in China/Mexico factories who litterial is working on a chain gang putting these things together to the sound of drums )

Suppliers (People who buys the product as wholesale or 1000-9000 units a pop ) who might be also be the makers of parts or the Big Wig companies.

Store owners ( who sells the product at prices which they think the populous will think is worth that much ).

In other words SONY is not losing any money on anything. SONY already pull out and made it's share. They proably have video screens watching the fools in Amerika fight over the PS3.
 
[quote name='RegalSin2020']Let me just expain something here in the world of buyer vs. Seller the seller is allways the better winner.

The food chain of how a product is made is the following if not diffrent.

Raw materials ( Minors in Africa/ Recycling of old parts )

Computer Science/Arcuterture ( the scientists people who comes up the design of parts. Like IBM, ATi, APPLE, )

*Assemblers( Labors in Chinas factories who litterial is working on a chain gang putting these things together to the sound of drums )..

Big Wig companies or small bussinesses ( who buys the parts from them )

*Assemblers( Labors in China/Mexico factories who litterial is working on a chain gang putting these things together to the sound of drums )

Suppliers (People who buys the product as wholesale or 1000-9000 units a pop ) who might be also be the makers of parts or the Big Wig companies.

Store owners ( who sells the product at prices which they think the populous will think is worth that much ).

In other words SONY is not losing any money on anything. SONY already pull out and made it's share. They proably have video screens watching the fools in Amerika fight over the PS3.[/QUOTE]
Painful.
 
[quote name='62t']MS is just a cheapass producer- using cheap parts for Xbox, the red ring probems with X360. Spend a few more bucks on your hardware.[/QUOTE]

Yes, because we all know how reliable the PS2 is. No issues there buddy.
 
[quote name='mykevermin']Well, if the cost of making a 360 can turn around $200 in one year, why couldn't it be just as close for Sony?[/QUOTE]

Blu-Ray, for one.

The Cell processor, for another.

Both are newer technology that will take a while to go down. It will be less expensive to make next year, but I don't know if it would necessarily be profitable.
 
[quote name='mykevermin']Well, if the cost of making a 360 can turn around $200 in one year, why couldn't it be just as close for Sony? In the end, if you accept that as possible, it really diminishes the "Sony is out of their minds!!!!" feigned outrage that is nothing more than the nom de jure around here anymore.[/quote]
I don't see sony's prices falling as fast. Blu-Ray drives will take a while to fall, as will their cell whatever bullshit. Since both of those are brand new the failure rate is enormous while the failure rate for DVD drives and the chips Microsoft was using wasn't as high even in the beginning. Microsoft was also only losing about $70 per unit when they started manufacturing the 360 too, not $240, so even if there is a $200 change in one year they'd still have a net loss of $40 for the 60gb and $100 for the 20gb. Not the best idea, but it might actually be profitable after 2 years then, which is half the console's life. Sony is banking on Blu-Ray taking off, since even if they sold a lot of games I doubt they'd make up the loss they're going to take.

The prices will fall, duh, but I think it'll take longer than it took for the hardware microsoft used and since microsoft didn't take much of a loss anyway, sony is crazy.
 
i dunno if I believe MSoft is not losing money, if i remember correctly they didnt start turning a profit from the original Xbox until like a year ago, if it even became profitable


it just doesnt seem likely that within a year they are making money on it. They are prob losing less, but no profit.
 
[quote name='Ikohn4ever']i dunno if I believe MSoft is not losing money, if i remember correctly they didnt start turning a profit from the original Xbox until like a year ago, if it even became profitable


it just doesnt seem likely that within a year they are making money on it. They are prob losing less, but no profit.[/quote]

Not sure exactly, but I believe the problem with the XBOX was that they were building it like a computer, and not usign any of their own resources.
 
[quote name='Ikohn4ever']i dunno if I believe MSoft is not losing money, if i remember correctly they didnt start turning a profit from the original Xbox until like a year ago, if it even became profitable


it just doesnt seem likely that within a year they are making money on it. They are prob losing less, but no profit.[/QUOTE]

The reason it took so long to make a profit on the original Xbox was because Microsoft didn't own all the technology in it. That also made it difficult for them to make price drops as well.
 
[quote name='gizmogc']Yes, because we all know how reliable the PS2 is. No issues there buddy.[/QUOTE]

And I'm so glad I've never gotten a DDE on my Xbox. Ever. Eleventy billion.
 
[quote name='KaneRobot']Blu-Ray, for one.

The Cell processor, for another.

Both are newer technology that will take a while to go down. It will be less expensive to make next year, but I don't know if it would necessarily be profitable.[/QUOTE]

I suppose. It really depends on what parts of the Xbox cost less this year compared to last year. Somehow, I don't think a dirt-cheap DVD drive was really expensive last year; you could buy a dvd drive for your pc for under $20-30 through retail chains, so I don't imagine there's a major change there.

What's surprising is MS' staunch insistence on keeping the 360 pricepoints, even if they're making a profit. With that in mind, I'm going to say I'm skeptical of the claim that they're making $125 profit on each system sold. By dropping the prices to $199 and $299, respectively, they'd only make $25 profit per console, but their marketshare would go through the fuckin' roof.
 
[quote name='dafoomie']Xbox 360 lost about $125 per system at launch, but they now make a profit of $75 on each system. Wii currently makes a "slight profit" on each system.[/quote]

After a year I would hope that Microsoft and friends would be able to be more efficient in putting together their machines.

Sony, being no newcomer in the world of electronics and manufacturing may be able to achieve economies of scale for the PS3 and turn a profit themselves within a year's timeframe as Microsoft did for the 360. As for the Wii, well they'll probably just keep turning profits until MS or Sony start announcing price cuts for their systems.

In any case, for MS, Sony, or Nintendo, the gap between loss and profit (or I guess in Nintendo's case profit and even more profit) will definitely lessen (grow) over time
 
[quote name='mykevermin']Well, if the cost of making a 360 can turn around $200 in one year, why couldn't it be just as close for Sony? In the end, if you accept that as possible, it really diminishes the "Sony is out of their minds!!!!" feigned outrage that is nothing more than the nom de jure around here anymore.[/QUOTE]
I'm not sure if Sony will be able to cut costs to that degree in that short a timeframe. The article mentions "exotic" parts, i.e. difficult and expensive to produce by their nature. 3 semiconductors with 1200 or more pins.

To quote the article:
There is nothing cheap about the PlayStation 3 design.
Click to expand...


Microsoft's #1 priority in designing the 360 was to make it cost efficient, with their costs going down greatly over time. They've succeeded in spades. Their costs will go down even further when they switch from a 90nm process to a 65mm process. That die shrink will not only make the chips cheaper, but will also reduce the cooling requirements.

PS3 was designed to incorporate technologies that Sony wanted to use in other businesses. They wanted Cell chips for their consumer electronics (remember the talk of having Cell chips in your TV?), and they want Blu-Ray as the next video platform. They're not there to make the PS3 cheaper or better, they're there to bring the costs down on those parts so their other divisions can benefit, while PS3 bears the brunt of the costs.
 
Given the ebay prices, Sony probably should have just set the price of the PS3 at like $2000 for the first month. It'll probably still sell out.
 
[quote name='gizmogc']Yes, because we all know how reliable the PS2 is. No issues there buddy.[/QUOTE]

Amen there. I've only had a DRE once with my PS2 and had it replaced. However, ALL of my friends who had a PS2 had theirs crap out on them like mine.

Never had a problem with my Xbox, and have yet to have one with my 360. I wouldn't say either company uses "cheap" hardware.
 
[quote name='A Happy Panda']Amen there. I've only had a DRE once with my PS2 and had it replaced. However, ALL of my friends who had a PS2 had theirs crap out on them like mine.

Never had a problem with my Xbox, and have yet to have one with my 360. I wouldn't say either company uses "cheap" hardware.[/QUOTE]
I said cheap parts. If MS spent a few more cent they could use better cable for HDD that could reduce load time for xbox1. A few more bucks on artic silver and it might save a few more xbox 360 from the red ring.
 
[quote name='62t']I said cheap parts. If MS spent a few more cent they could use better cable for HDD that could reduce load time for xbox1. A few more bucks on artic silver and it might save a few more xbox 360 from the red ring.[/QUOTE]
No one uses Artic Silver on this level, its too expensive...

If Sony spent a few more cents instead of using cheap plastic parts in their drives that wear down over time, they could have avoided most PS1 and PS2 drive failures. By cutting that one corner, they drastically shortened the operational life of those drives.

Millions of systems failed because of a single point of failure which literally only saved them a few cents. I'm sorry, but if MS uses cheap parts (and the OEM's that they contract this stuff out to probably do), then Sony is the king of the cheap part empire.
 
[quote name='dafoomie']No one uses Artic Silver on this level, its too expensive...

If Sony spent a few more cents instead of using cheap plastic parts in their drives that wear down over time, they could have avoided most PS1 and PS2 drive failures. By cutting that one corner, they drastically shortened the operational life of those drives.

Millions of systems failed because of a single point of failure which literally only saved them a few cents. I'm sorry, but if MS uses cheap parts (and the OEM's that they contract this stuff out to probably do), then Sony is the king of the cheap part empire.[/QUOTE]
MS could use better thing for the X360 CPU than whatever they are using, or at least more of it. Right now people open up their X360 and see that MS could have done more

MS buy all the parts for the original xbox, so they know what they are getting.

The Thomson drive for the Xbox is huge problem. They could have only buy from respected compnaies like samsung and Philips. I am not saying sony doesnt cheap parts, but MS isnt much better.
 
[quote name='psiufoxx2']Could you imagine? If a major system launch occurred on eBay? I'm sure a company like Sony could pull some sway with eBay so that they didn't lose nearly the same % of commission on each system.[/quote]

In Japan the 60 GB PS3 launched with an "open price". Retailers were allowed to charge whatever they thought appropriate for that model. Not too different from what would happen on Ebay. In fact, eBay would be a better predictor of market demand.
 
[quote name='62t']MS could use better thing for the X360 CPU than whatever they are using, or at least more of it. Right now people open up their X360 and see that MS could have done more[/quote]
This doesn't make sense. Try again.

[quote name='62t'] MS buy all the parts for the original xbox, so they know what they are getting. [/quote]
MS knows generally what they are getting, but a lot of actual production decisions on parts, such as DVD drives, are decided by the manufacturer, not the buyer. MS says, "Give me a reliable, low-cost DVD drive." It is up to the drive manufacturer to quote a price and construct the drive. If the drives prove unreliable, then you can bet the deal is off.

[quote name='62t'] The Thomson drive for the Xbox is huge problem. They could have only buy from respected compnaies like samsung and Philips. I am not saying sony doesnt cheap parts, but MS isnt much better.[/quote]
The Thompson drive was not a huge problem. MS stopped using them, fixed them, and I still have 2 v1.0 Xboxes with working Thompson drives. Granted, the Thompson drives weren't great for the consumer, but they were nowhere near as bad as the drive failures on PS2s. I had mine replaced THREE TIMES. Also, just because you haven't heard of a company doesn't mean they're not "respectable." There are thousands of respectable, large volume companies out there that manufacture disc drives that you have never heard of because they don't produce commercial products.
 
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