PlayStation 4 Costs $381 To Build

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If this information is correct, Sony might actually make a little money on each PlayStation 4 sold. While it isn't much, it is a whole hell of a lot better than losing money on each console.

AllThingsD got an early look at the analysis, in which the firm estimates the cost of those parts, plus what it costs to assemble them, at $381. That is only $18 shy of the PS4’s $399 retail price, leaving Sony little profit margin on the sale of the device itself.
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How is that profit, retailers need to make a profit, then there are logistics. It's in the red still, way better than the PS3, but still in the red.
 
packaging and shipping from China will probably take up the $18 difference. Not too sure how much in advertising and marketing they spend though that could be made up by the sale of developer kits to various companies.
 
I thought I had read somewhere they were currently losing ~$60 per console? Even then, that would be far better than the losses they were taking at the PS3's launch.
 
I guess if we are assuming that the retailer has zero markup and it cost nothing to import and distribute them, then Sony might be making a small profit.
 
Parts and labor aren't the whole enchilada. There is often 2-3 layers of profit (Sony+Wholesaler+Retail), shipping, warranty, tech support. Of course marketing adds big time as well.

If it costs $381 to make a PS4, Sony is probably losing at least $50 each if it's only 2-tier.
 
MikeTrike said:
How is that profit, retailers need to make a profit, then there are logistics. It's in the red still, way better than the PS3, but still in the red.
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Well it is hella better than the PS3 losses they took for years. I keep my fingers crossed that both next-gen consoles (Wii-U doesn't count) do well. Competition drives the industry, will drive down prices and keeps both side innovating. :)
 
I have a hard time believing AMD is charging $100 on its APU.
 
This bullshit again? This gets posted every time a console comes out, and the same crap reporting uses customer retail prices, which I guarantee you Sony is not paying for their components. Amd is not charging 100 for the apu, and there's no way the memory is costing Sony 80, unless they're horrible at negotiating bulk pricing.
 
Stoly said:
I have a hard time believing AMD is charging $100 on its APU.
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That jibes with the back of the envelope calculation I did based on 1) sharp graphics revenue increase in AMD's Q3'13 financials (console APU sales are counted under graphics division revenue) and 2) the (estimated) unit shipment increases AMD had in the same time period. That gives about a $100 per unit in additional revenues.

I agree with your skepticism though. There may have been one time payments from Sony and MS in the Q3'13 period, and future units may be sold to those companies at a lower cost. There's just not enough information available yet, but we'll see a clearer picture of pricing in the Q4'13 filing when it comes out in January.
 
teh_chem said:
...and the same crap reporting uses customer retail prices, which I guarantee you Sony is not paying for their components.
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No, it doesn't. The firm doing the breakdown assumes quantity negotiated prices.
 
Well hopefully they'll make some reasonable money on it inside a year then, Sony has been in pretty dire straights for a while now and Playstation has become a rather important piece of their business.
 
teh_chem said:
This bullshit again? This gets posted every time a console comes out, and the same crap reporting uses customer retail prices, which I guarantee you Sony is not paying for their components. Amd is not charging 100 for the apu, and there's no way the memory is costing Sony 80, unless they're horrible at negotiating bulk pricing.
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16 512mb GDDR5 chips at 4 dollars a pop from samsung sounds about right... or do you assume graphic card makers get worse deals?
 
Not really unexpected. Both the PS4 and XBOne seem to be designed in reaction to the chief financial problems of their respective predecessors.

The PS4 seems to be designed with penny pinching in mind, to avoid the huge debt Sony piled up with their $599 and still sold at a major loss PS3. The HDMI port was obviously sourced from the cheapest factory possible (you seriously need to be using the bottom barrel stuff to get the results they have) and the cost cutting might bite Sony big time if the blue light of death turns out to be a systematic fault with the console rather then a hiccup.

Microsoft already went through that, the 360 flying way to close to the engineering tolerances with last minute redesigns and changes to the GPU (which a safe company would have sent back for complete recertification), resulting in a console that could pass normal physical testing but lacked the margins needed to survive real world long term use. That cost them a lot when a third of consoles failed after a year or two of heat cycling. The XBOne seems (it hasn't been launched yet so we can't be certain) to be overengineered in an attempt to avoid that happening. The case itself is bigger then any previous major console (the PS3 was compared to a grill when it came out and it's small in comparison) and probably has manufacturing tolerances you could drive a bus through. But all of that might have left them less competitive against the PS4, I think the manditory Kinect markup might well be to help hide the higher cost of the console itself.
 
MikeTrike said:
How is that profit, retailers need to make a profit, then there are logistics. It's in the red still, way better than the PS3, but still in the red.
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This is why I think this number is way off, what it actually costs to make a PS4.
 
Parja said:
No, it doesn't. The firm doing the breakdown assumes quantity negotiated prices.
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Semantics said:
16 512mb GDDR5 chips at 4 dollars a pop from samsung sounds about right... or do you assume graphic card makers get worse deals?
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I think it's wrong to assume anything. Who actually knows what deal Sony has gotten?

I do think these breakdowns are a bit pointless unless you can actually say with assurance that's what Sony is paying.
 
Outamyhead said:
This is why I think this number is way off, what it actually costs to make a PS4.
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Its a BOM doesn't include all costs obviously. But it is the gold standard for what you can figure out without inside numbers and lets you know something. If you compare it to another BOM you will see it is cheap in comparison to what they have done with say the PS3. Its not way off, a company that studies this doesn't just assign random numbers, and big companies, both suppliers and buyers are not going to agree to out of the normal costs for components.

Also there are plenty of products retailers sell that they make little to no money on. Something like a console that drives people in to get them to buy the accessories seems very reasonable to have low profit margins.
 
Sony doesn't pay the prices in the article when they are buying multiple millions of parts thy are paying far less than the prices used in the article.
 
quimby999 said:
Sony doesn't pay the prices in the article when they are buying multiple millions of parts thy are paying far less than the prices used in the article.
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Don't you think the company would factor that into their prices?
 
Sometimes bulk purchase is just too make sure you get the parts you need to meet demand. It isn't always going to cost you slightly less for the product.
 
gglenn said:
I guess if we are assuming that the retailer has zero markup and it cost nothing to import and distribute them, then Sony might be making a small profit.
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Making assumptions that are known to be wrong can only lead to dubious conclusion.

Zero markup, no shipping cost... Everybody loves Sony.
Or should I assume that its Santa Clauss himself that carried the consoles over to America? :rolleyes:
 
I just checked at the store, it actually after everything is all said and done, costs $399 + tax to acquire :p
 
I'm going to go ahead and assume that the writer of the article is an imbecile if he thinks Sony is making a profit on a 381 dollar console that RETAILS for 399.
 
People seem to assume that economy of scale will always reduce the price a product and thus a large staple shipment = to lower bargained price. That's simply not true enough to count on that.
 
Shipping is barely a dent in that $18. If they just shipped a million units, it doesn't cost them 18 million in shipping charges. A lot of people are going to be buying a second controller too. Which will probably be a nice profit
 
Aluisious said:
I'm going to go ahead and assume that the writer of the article is an imbecile if he thinks Sony is making a profit on a 381 dollar console that RETAILS for 399.
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So did you read TFA? The author makes no assertions that Sony is making any profit on it.
 
Tudz said:
I think it's wrong to assume anything. Who actually knows what deal Sony has gotten?
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Right, they should surely be punished for their assumptions. Articles written basically as an academic exercise and provided for little more than entertainment value must be purely factual! To do otherwise should be considered an act of treason!
 
Understanding of sales channel fail. $381 manufacturer COGS and a $399 retail price is fine when you're an OEM selling a digital product (although it better be really high volume or else you won't make much $$$). In many industries, the OEM gets marked up slightly by a wholesaler and somewhat more by a retailer, even if Sony went direct to the retailers there isn't enough profit there for the retailer to bother, I imagine they want to make $30-50 or more on each one sold.
 
The money is in the accessories. They can lose a little on each console and be fine. I'd like to know how much they profit off the $60 controllers, that's where the money is
 
hkcavalier said:
Understanding of sales channel fail. $381 manufacturer COGS and a $399 retail price is fine when you're an OEM selling a digital product (although it better be really high volume or else you won't make much $$$). In many industries, the OEM gets marked up slightly by a wholesaler and somewhat more by a retailer, even if Sony went direct to the retailers there isn't enough profit there for the retailer to bother, I imagine they want to make $30-50 or more on each one sold.
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Who fails to understand? Retailers sell things that make no or little profit all the time in hopes of driving customers into the store to buy more items or accessories. But all of that ignores the fact that SONY could just as easily be selling it for $350 to the retailers.
 
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