PlayStation 3 to Retail at $400 – Production Costs Almost $500
Analysts predict massive losses for SCE.
According to securities firm Merrill Lynch, Sony is set to lose around $100 per PlayStation 3 hardware set it produces, even if the machine comes with a $400 asking price on day one.
Analysts believe that production costs look set to top around $500, with key components (Cell Processor, RSX and BD ROM drive) averaging at a shade over $100 each to make. Merrill Lynch claims that SCE is likely to sell the PS3 at $399 in the US and $410 in Japan, figures that project a loss of around $1.2 billion in the first year the machine is on sale.
Of course, loss-leading hardware is the norm for Sony and Microsoft. The losses surrounding the original Xbox were well documented and Sony’s financial reports for the launch of PlayStation 2 showed it losing around half a billion dollars in a single year. Of course it recovered this initial blip and made a profit of around $1.8 billion in the following two years.
However, it must be remembered that the market is very much different today. By the time the PlayStation 3 launches, Microsoft may have had a year with its Xbox 360 on sale, probably at $299. At the end of that year, MS could slash its pricing to $199 or even less, halving the asking price of its competitor.
When quizzed about the viability of the PlayStation 3, SCE chief Ken Kutaragi hinted that the asking price will be set high. “Whether consumers think a product is expensive or inexpensive depends on the balance between its appeal and price. Our goal for PlayStation 3 is for consumers to think to themselves, ‘ I will work more hours to buy one.' We want people to feel that they want it, irrespective of anything else."
Kutaragi continued, "Nintendo was selling its 16-bit machine for $114 and we sold the first PlayStation for $364. The press said that it was too expensive, but it was a huge hit. The story is the same with the PlayStation Portable from last year. The Game Boy Advance is a handheld gaming machine, and it costs $91. The PSP had cost $229. But people queued up overnight to buy it, and it sold out on launch day. It depends whether people want it and naturally I'm confident that the PS3 is a product that people will definitely want."
Reports that KwikSave might launch a take-over for SCEI should the PlayStation 3 launch come unstuck remain unconfirmed at time of press.
Analysts believe that production costs look set to top around $500, with key components (Cell Processor, RSX and BD ROM drive) averaging at a shade over $100 each to make. Merrill Lynch claims that SCE is likely to sell the PS3 at $399 in the US and $410 in Japan, figures that project a loss of around $1.2 billion in the first year the machine is on sale.
Of course, loss-leading hardware is the norm for Sony and Microsoft. The losses surrounding the original Xbox were well documented and Sony’s financial reports for the launch of PlayStation 2 showed it losing around half a billion dollars in a single year. Of course it recovered this initial blip and made a profit of around $1.8 billion in the following two years.
However, it must be remembered that the market is very much different today. By the time the PlayStation 3 launches, Microsoft may have had a year with its Xbox 360 on sale, probably at $299. At the end of that year, MS could slash its pricing to $199 or even less, halving the asking price of its competitor.
When quizzed about the viability of the PlayStation 3, SCE chief Ken Kutaragi hinted that the asking price will be set high. “Whether consumers think a product is expensive or inexpensive depends on the balance between its appeal and price. Our goal for PlayStation 3 is for consumers to think to themselves, ‘ I will work more hours to buy one.' We want people to feel that they want it, irrespective of anything else."
Kutaragi continued, "Nintendo was selling its 16-bit machine for $114 and we sold the first PlayStation for $364. The press said that it was too expensive, but it was a huge hit. The story is the same with the PlayStation Portable from last year. The Game Boy Advance is a handheld gaming machine, and it costs $91. The PSP had cost $229. But people queued up overnight to buy it, and it sold out on launch day. It depends whether people want it and naturally I'm confident that the PS3 is a product that people will definitely want."
Reports that KwikSave might launch a take-over for SCEI should the PlayStation 3 launch come unstuck remain unconfirmed at time of press.
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Comments
dmgice 29 Jun 2005 15:39
1/3
They sold the SECOND Play Station for $364. Unless he's talking about the Play Station model that came with a SNES cartridge slot. I love how he forgets the real competition at the time: The Sega Saturn.
The PSX won in America by being $100 cheaper than the Saturn. ($299 compared to $399)
People queued overnight for the GBA and GBA SP. You can bet there will be people -mostly hipsters- qeued for the Micro as well in Japan. That said, shouldn't he be more concerned about how the DS is handing the PSP's ass to it in Japan? Also, most everyone already owns a GBA in Japan. Unlike the Sony PSP, a short drop doesn't shatter an SP. At least he recognizes that the DS is not a GB family handheld. It's an offshoot like the Pokemon Mini. I hate it when people call it a Game Boy DS. Because -despite sharing the same chip family as the GB- it is not a reiteration.
The PSX won in America by being $100 cheaper than the Saturn. ($299 compared to $399)
People queued overnight for the GBA and GBA SP. You can bet there will be people -mostly hipsters- qeued for the Micro as well in Japan. That said, shouldn't he be more concerned about how the DS is handing the PSP's ass to it in Japan? Also, most everyone already owns a GBA in Japan. Unlike the Sony PSP, a short drop doesn't shatter an SP. At least he recognizes that the DS is not a GB family handheld. It's an offshoot like the Pokemon Mini. I hate it when people call it a Game Boy DS. Because -despite sharing the same chip family as the GB- it is not a reiteration.
jsm30625 29 Jun 2005 16:41
2/3
My thoughts exactly.
Thief 30 Jun 2005 05:13
3/3
It really stuns me that Sony is so popular. They have terrible hardware, not very great exclusives and their systems, and then they get the head guy of their system to come out spouting garbage like this. He doesn't even compare his products to the competition it had at the time, and then backs up his claims with half truths. He has to know that the DS is kicking the PSP's ass, yet to make him feel and look better he compares it to the 4 year old GBA (note, he didn't even say SP, I don't think.), what is that? I also doubt it will be that cheap, Sony has shown time and time again they don't care about bringing their systems price down to reasonable. I mean, the year older PS2 is still even the same price as the Xbox, and the PSP is ridiculously expensive, and doesn't even come with everything it needs! Although, I think they're going to have to do something to win the next generation, because like Spong said, the Xbox will be out, and be out for a while, and if MS is smart they'll drop the price, as well as release Halo3 on it's release day.
