Playstation 3 Now 70% Cheaper … To Build.

By  |  Thursday, July 30, 2009 at 4:36 pm

playstation3Here’s a tidbit from Sony’s recent investor conference call that everyone but TotalVideoGames apparently missed: The Playstation 3 is roughly 70 percent cheaper to build than it was at launch.

This is according to Nobuyuki Oneda, Sony’s executive vice president and chief financial officer, who provided the figure when pressed by investors. More than any of the rumors we’ve been hearing ad nauseum for months, this is the best indication that the Playstation 3 will have a lower price tag this fall.

Nonetheless, it was only a few weeks ago that Sony’s chief executive, Howard Stringer, said the company would lose money on every console sold if the price were lowered. Both claims can’t be right, so one of these Sony execs doesn’t have his facts straight.

Sony hasn’t disclosed the PS3′s original manufacturing cost, but a couple estimates have pegged the number at $800 at launch, dropping to $400 in January 2008. iSuppli’s estimates from last December said the console costs $448.73 to build, so there’s room for error in the unoffficial estimates.

But let’s just say the PS3 build cost was $800 per unit initially. Knock off 70 percent and you’re left with $240 per unit. That means Sony not only gains from each console sold at $400 each, it can afford to bestow the now-mythic $100 price drop and still profit.

Not that a price cut would surprise anyone. Game publishers have on several occasions raised their cries for a cheaper PS3 to a crescendo. The logic says more console sales equals more game sales, but Sony has always insisted it can’t take the hit up front.

The problem is, both console sales and software sales were down last month, and Sony is taking huge losses. There will eventually come a point where it’s more economical for Sony to invigorate both sides of the equation than to keep maxing out earnings on console sales alone. I think that time is coming sooner than later.

 
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8 Comments For This Post

  1. rtk_13 Says:

    the original ps3 was released with a price tag off $600 i already knew they lost $200 per ps3 considering they sold a few million in the first year they released the console thats a hefty loss. I know sony release these products to the highest standard they can i have a p3s after all but for the first time in a long time the company posted losses and they desperately need to break even. I dont think the price drop is going to happen now unless the PS3 slim is released with a manufacture cost that is significntly reduced. All in all they can do what ever they want i already own one of the ‘black beasts’….. Unless it breaks

  2. DW Says:

    Good job TotalVideoGames for grabbing that fact out of the air. Everyone else DID miss it.

    I think if anyone at Sony doesn’t know the big picture regarding ps3 specifics, it would be Howard Stringer.

    Sony is actually making profits on their ps3 even though they publicly claim that their operating loss came in at 25.7 billion yen in April-June, and that loss is primarily from the PlayStation arm of their company. That is a total bullshit statement. If the ps3 was losing THAT much, no investor would keep their money in. They would cut and run.

    I’d say Stringer is flat-out lying to everyone. Well.. he is a CEO. The ps3 is profitable, and a price cut should happen any day now. After that, look to ps3 sales increasing dramatically and eventually overtaking the Xbot’s 360 in total consoles sold.

  3. gamewatcher Says:

    $400 (retail price) is NOT what Sony makes on each console. You have to know the wholesale price to know what Sony actually makes in revenue.

  4. Ron Says:

    I agree… they are still losing money if their cost is $240 before shipping and marketing costs.

  5. Jared Newman Says:

    @gamewatcher, @Ron

    Good points. I don’t know the figures. I do know that at least for games, the profit margins are very low for a retailer like Gamestop — the real money is made on used sales, so I can’t imagine there’s a great difference between wholesale and retail price.

    If Sony would still lose money — and not a much as before, mind you — do you think it’s a good idea to cut the PS3 price now? I think so, especially if we’re truly in the middle of a 10-year console cycle. Maybe the fear is that if Sony announces a price cut, the other console makers will follow, and Sony’s back to square one..

  6. ps3 deals Says:

    Sony do need to drop the price, not because the system isn't worth it, because it is worth £300 (in the UK) all day long, but because of the timing, the credit crunch is upon us all and xbox 360's are £150, for the people who don't have much money and want a next gen console, which one are they going to go for? thats right the xbox 360. If sony lowered the price to £200 then people might stretch the extra money for the ps3.

  7. Andrew Says:

    Lets do the math.. a)50 people buy a PS3 at $299 or b)100 people buy a PS3 at $199.

    a) $14950 or b) $19900

    they have to take the economy in account… Sony is a huge company, They aren’t gonna hurt!

  8. dontwannasaymename Says:

    1 thing a luray drive costs $50 the processor costs $100 why dont just cut the cost of those i mean they are using the highest possible chipsets to build these in thier budget

    btw i can make a ps3 for $150 with an old recycled computer and a new processor and chipset hehehe

    ^_^

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