Report: PS3 design cost finally nearing break-even

[Gauravs90]

Since its launch three years ago, Sony's PlayStation 3 has always been more expensive than its rivals, Microsoft's Xbox 360 and Nintendo's Wii, in large part because the components in the PS3 cost so much to assemble.


At launch, for example, the console cost Sony about $805 to build, according to technology research firm iSuppli, with the highest-priced version selling for $599.


According to a report, the component costs of the Sony PlayStation 3 may finally mean the company is closing in on break-even for the console.
(Credit: Sony Computer Entertainment of America)


But now, a new iSuppli report issued Friday suggests that Sony may finally be nearing the break-even point with the PS3. It said that its teardown analysis service estimated that the design cost of the new 120-gigabyte PS3 Slim comes in around $336, while it sells for $299 in the U.S.


That means that while Sony is still losing about $37 per unit--plus somewhat more for marketing, royalties, box contents, and other expenses--it is for the first time closing in on breaking even with the console itself.


A Sony representative said Friday the company has a policy never to comment on the cost structure and breakdown of its hardware.


According to iSuppli, its 2008 analysis of the PS3's component costs showed that the then-$399 console was losing at least $50 per unit. So it's notable that even at the lower price, Sony is losing less money. Further, the analysis firm suggested that with component costs dropping rapidly, Sony could soon find itself making money on the PS3.


To be sure, companies like Sony, Microsoft and Nintendo are willing to subsidize the cost of their video game consoles because they make their real money on sales--and royalties--of games. The more consoles they can put in consumers' living rooms, even if they take losses on them, the more they can make on the games.


But Sony took a beating in the media in the early days of the PS3 because it was losing so much on each PS3, not to mention that the high cost of the console made it an unattractive buy.


Now, with the August release of the PS3 Slim, and its reduced price, the console is finally coming close to matching its rivals' sales numbers. In September, the PS3 even won its first-ever month, as measured by total console sales. In November, however, the benefits of a great deal of pent-up demand for a lower-priced PS3 seemed to have been played out, and once again, the PS3 came in third, trailing the Wii and the Xbox.


Still, the PS3 was only marginally behind the Xbox in units sold in November, and there certainly seems to be renewed enthusiasm for the console at the lower price.
And when Sony finally sees a profit on each PS3 sale, there will no doubt even be smiles in the company's board room. Stay tuned to see when that actually happens.



http://news.cnet.com/8301-13772_3-10414022-52.html