Since it launched the PS3 back in 2006, Sony has been losing money on every console sold. The reality is that the hardware has always been so expensive to manufacture, that selling it even at cost would make it very difficult to reach a substantial number of users.
Counting the cost
The first model of the PS3 was thought to cost around $805 to manufacture. Sony sold it for a whopping $599, and even though it was losing around $200 on every console sold, it was still perceived as a very expensive gaming platform.
This is not unusual for console manufacturers however, as their strategy is to sell as many consoles as possible, even at a loss, and then make their profits in software and licensing sales. Not only do Microsoft and Sony have their own development studios, but they also get a cut of every third party (Activision, EA, Capcom, 2K etc) game sold for their respective device.
Still, losing as much as $200 per console was obviously going to hurt Sony’s coffers, and they have been working hard to reduce the manufacturing costs of the PS3.
With the launch of the PS3 Slim it was estimated that the PS3 was costing around $336 to manufacture. Since it was selling for $299, it was thought that Sony was losing around $37 on every console sold. Considering that shortly before the release of the Slim, Sony was thought to be losing around $50 on every console sold, this was considered pretty decent.
More recently, Sony managed to get the manufacturing cost down ever further, from losing $37 on the original Slim, to $17 on current models thanks to further reductions in the console’s size and functionality.
Now cheaper than ever to manufacture
Sony stated earlier this year that they aimed to turn a profit on every console sold by 2011, and now it looks as though they have hit this target 8 months early.
Due to the inclusion of a used a new, smaller 40nm graphics processor, the console now requires less power draw, and creates less heat, which means it requires less cooling. The combination of these three fundamental changes means that for the first time ever, the manufacturing cost of the PS3 is expected to drop below its retail cost.
Sony has yet to make any official comment on the current profitability of the PS3 console. However, there is always the possibility that they may shave a further $50 off the PS3’s retail price to stimulate sales and undercut the Xbox 360, although, if they are smart, they will wait to see what Microsoft do with Project Natal and the fabled “Xbox 360 Slim” later this year.
Discuss PS3 manufacturing costs in the forums
Loading ...
