PS3 Could Break Even In 2009

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According to this article, the cost of building a PlayStation 3 is now only $449 (down from $840 two years ago). That means Sony currently only loses $50 a console but, according to the report, the company could reach the break even point sometime in 2009.

Back then, an iSuppli analysis pegged Sony's "bill of materials"—the total cost of all the components used to build it—at more than $840 for the model that sold at the time for $599, and $805 for the starter model that sold for $499, making it a money-loser for Sony. It still appears to be a loser two years later, iSuppli says, but the loss is shrinking: The PS3 now costs $448.73 to build while selling for $399.
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When I read the title I thought it meant "Sony could break even on the entire PS3 investment by 2009 counting all hardware and software sales", which would have been big news.. though it's still good that they're finally getting near to breaking even on each console sold. How long did the 360 take to reach break even point?

Out of interest do we actually have any approximations on how much Sony's overall profit/loss on PS3 to date has been counting R&D etc?
 
If I was an executive and someone came to me with a proposition which basically required me to lose billions for a few years with the possibility of a profit sometime in the future. I would kick them out the door myself.
 
Chombo said:
If I was an executive and someone came to me with a proposition which basically required me to lose billions for a few years with the possibility of a profit sometime in the future. I would kick them out the door myself.
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welcome to the world of finance
 
except, this console was designed/is going to have a 10 yr life span. SO, youve got to look at it like this, how will we come out in 10 years? Then, now that all the R&D is done, whenever PS4 comes out, the Cell will have all the hard work already done, so the next console will be much cheaper to create than this one.

You have to look at the REALLY BIG picture, just looking a few years ahead aint gonna cut it. Yea, they took a risk, but a company like Sony can do that, and with BR as the winner, things can only go up from here, even if they go up at a crawl, 20years of crawling can get you real far, and if you crawl, its hard to fall...

Just try to keep it all in perspective.
 
haithamt said:
welcome to the world of finance
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The problem is, most smart investors or finance departments look at the market, assess the risks, THEN green light or kill the project. Sony seemed to have its head up its rear basking in how great Sony is and how great Sony is to its peons when it green lighted subsidizing billions in manufacturing costs (not even counting development costs). They could not conceive of the notion that they would ever possibly fail or that their peons would fail to throw money at their feet and grovel because they are Sony.

It's one thing to put large amounts of money into developing new products, but when said product needs hundreds of dollars in subsidized costs per product in order to sell...you have a problem. I know some will use the razor and the razor blade analogy, but Gillette doesn't lose $300 per razor. Even Microsoft which has a lot more money in the bank than Sony does chose to better manage its costs. So while MS also chose to subsidize some of the costs of the Xbox 360, at least it chose a middle ground and tried to lower some of its costs while obtaining very good performance.

Sony may very likely achieve cost parity by the end of 2009 in terms of manufacturing costs associated with the PS3 but it is at the cost of broken promises and a stripped down machine. I do think that if Sony can drop the price by another $50-100 on the costs, they may chose to re-include backwards compatibility which is a good thing. This will at least mean Sony's entertainment division will at least be profitable as the PSP and PS2 are still making money and the only reason Sony's entertainment division doesn't look worse.

Sony's billions in development and subsidizing costs for the PS3 may not be recoverable. Sony's plan required the PS3 to be in the number one spot in this console generation and the PS3's profitability forecasts were always dependent on that. Sony at best is a tenuous second and it can easily slip to third.
 
Too bad the only way they could do it is to pull out the components that make it worth buying. Less USB ports? No Backwards compatibility hardware or software?

Oh my, what a value.
 
Funny part is that with the name recognition and fans boys, Sony could have branded shoe boxes "PS3" and still raked in a bundle. No matter how you slice it, the PS3 has been a disaster for Sony,
 
pigpen said:
Funny part is that with the name recognition and fans boys, Sony could have branded shoe boxes "PS3" and still raked in a bundle. No matter how you slice it, the PS3 has been a disaster for Sony,
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Oh boy...here we go.
 
Vaulter98c said:
except, this console was designed/is going to have a 10 yr life span. SO, youve got to look at it like this, how will we come out in 10 years? Then, now that all the R&D is done, whenever PS4 comes out, the Cell will have all the hard work already done, so the next console will be much cheaper to create than this one.

You have to look at the REALLY BIG picture, just looking a few years ahead aint gonna cut it. Yea, they took a risk, but a company like Sony can do that, and with BR as the winner, things can only go up from here, even if they go up at a crawl, 20years of crawling can get you real far, and if you crawl, its hard to fall...

Just try to keep it all in perspective.
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A 10 year life cycle is bogus. This only truly works if your console is number one with a large margin of victory. The NES had this and was around for about 20 years before support stopped. Heck, even the Dreamcast had a long life if you really want to stretch things. Support and games release for it only recently stopped. So yeah, the PS3 can have a 10 year life cycle but in 5 years when the shiny new toys from MS and Nintendo comes out, the PS3 will not be relegated to 3rd but rather to a niche.

As far as being a viable contender for a major console, it will end in about 3-5 years whether you like to spout Sony's "10 year life cycle" company line or not. People are attracted to shiny new toys. I will be extremely extremely surprised if Sony does not have a PS4 out in 4-5 years or at least about to be released.

Cell is partially owned by IBM and Toshiba. Now, I'm not into who owns what exactly but the Cell processor is based partially on designs by IBM and IBM owns a lot of the patents used in the Cell processor. So don't kid yourself, if Nintendo or MS wanted Cell (whatever future iteration it's at) in their new consoles, IBM or Toshiba will sell it to them. Furthermore, what makes you think that Intel or AMD won't have a cheap and powerful multi-core CPU out that will work just as well, if not better, for consoles made by MS and Nintendo. So any advantage Sony can glean from Cell for the PS4 is at best a wash.

Sony is also not the sole proprietor of Blu-Ray. Many companies (Sony likely more than others) in the Blu-Ray Disc Association contributed to it. Nintendo and MS can buy a Blu-Ray optical drive for their next console easily. Any advantage that Sony can glean from Blu-Ray in the PS4 is again at best a wash.

To be fair, any advantage Nintendo now has from "waggle" will also be a wash in the next gen console race but at least Nintendo is being taken for a serious contender in the console market again. This more than anything will mean Nintendo is not to taken lightly in the next gen of consoles. Nintendo needs to greatly refine motion controls because it would be stupid to think MS and Sony won't include the basic controls Nintendo has now and refine it further.

Bottom line is because of Nintendo, gamers win again. Nintendo has again taken the industry in new directions rather than the stagnation that was seen when jumping to the PS2 and PS3. The PS2 and PS3 was basically a "more, bigger, better" mentality with no real innovation.
 
Don't they still make money on... accesories and games...??? Obviously they have to license people to make the accesories and games, pluis they sell controllers, remotes, and accesories. I somehow doubt they are still losing money on this system, maybe before factoring everything else into the equation..
 
All I can say is not likely. Their entertainment devision is still bleeding money and will likely continue. The XBOX360 is getting stronger against them and without a price drop they likely will continue to fall farther behind MS. With a price drop they might slow decline in market share, but will increase their losses. They have trimmed components and done die shrinks already and more is unlikely until summer at the soonest. At that point they could break even, but not if they cut the price by $100. Plus MS's attachment rate is much higher. MS is making good money now... something they rarely managed with the XBOX.
 
I think its funny that theres a front page story about how Sony "could" break even next year!
 
Vaulter98c said:
except, this console was designed/is going to have a 10 yr life span. SO, youve got to look at it like this, how will we come out in 10 years? Then, now that all the R&D is done, whenever PS4 comes out, the Cell will have all the hard work already done, so the next console will be much cheaper to create than this one.

You have to look at the REALLY BIG picture, just looking a few years ahead aint gonna cut it. Yea, they took a risk, but a company like Sony can do that, and with BR as the winner, things can only go up from here, even if they go up at a crawl, 20years of crawling can get you real far, and if you crawl, its hard to fall...

Just try to keep it all in perspective.
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Bad news: The GPU in the PS3 (along with the Xbox 360) has already hit its limits.
 
Vaulter98c said:
You have to look at the REALLY BIG picture, just looking a few years ahead aint gonna cut it. Yea, they took a risk, but a company like Sony can do that, and with BR as the winner, things can only go up from here.
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I loved that part the most.
 
Todd_a said:
MS is making good money now... something they rarely managed with the XBOX.
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The 360 has already lost so much money though that it will never break even. I don't remember the Xbox ever having a money making year.

The PS3 has only been out two years. The 360 also lost huge amounts of money the first 2 years. Although I would guess the PS3 ends up losing more overall.

Makes me wonder what both companies are planning for their next generation since MS and Sony have lost so much money while Nintendo has been making an unbelievably huge amount of profits.
 
Chombo said:
If I was an executive and someone came to me with a proposition which basically required me to lose billions for a few years with the possibility of a profit sometime in the future. I would kick them out the door myself.
Click to expand...

That's exactly why you're not and probably don't run a business...:D
 
]Ken Kutaragi and Peter Moore no longer have their positions as heads of each console.
 
wait a minute... break even? you mean per console, but breaking even would mean they start making profit from selling consoles. which means they have compensated billions of dollars lost. i doubt they could ever break even in total just by looking at the consoles.

i only had my ps3 for 3 weeks. then i realized what a bunch of crap it is compared to a pc and how worthless it is as a bluray player (since there were hardly any movies out). so i sold it and hopefully will never make the mistake again of thinking some console is worth having. mistake made with xbox1, gamecube, ps3...
 
What an insane gamble Sony took, just the textbook definition of hubris thinking that a slam dunk like the PS2 was a given (and that's with an initial $600 price tag!). Its too bad because the PS3 itself is a pretty nice device, awesome for media streaming and Blu Ray playback.

It just doesn't make any actual financial sense. Again, WTF were they thinking?
 
Serpico said:
It just doesn't make any actual financial sense. Again, WTF were they thinking?
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They were thinking Americans with their big fancy SUV's and Hummers and Big ass houses on MTV cribs could afford a measly 600 dollar game console. I mean surely there was no failed logic in that thinking right:confused:
 
dmfg said:
When I read the title I thought it meant "Sony could break even on the entire PS3 investment by 2009 counting all hardware and software sales", which would have been big news.. though it's still good that they're finally getting near to breaking even on each console sold. How long did the 360 take to reach break even point?

Out of interest do we actually have any approximations on how much Sony's overall profit/loss on PS3 to date has been counting R&D etc?
Click to expand...

In terms of this article, the 360 never reached the break even point, nor most likely will it ever. The 360 console itself sells at a loss and will continue to do so since MS more than recoups from software sales. There's no reason for them to break a formula that works well.

This article isn't talking about how Sony's gaming division might break even, but just the PS3 itself. Sony already broke even this year quarter for quarter on the PS3 with software plus hardware sales (however it is not making up the R&D costs). With the PS2 and PSP included they actually do make money in their gaming division.
 
Sure MS are still losing money on 360s? I thought they were making some very small amount of money on each 360 they sold now, though that may have disappeared into price cuts for the 360.

And yes, I did grasp what the article was about but I was curious what the (much more interesting) big picture looked like, since the amount they make/lose on each console is fairly irrelevant when it comes to overall profit/loss. I suppose there's always google.
 
Eggothewaffle said:
Bad news: The GPU in the PS3 (along with the Xbox 360) has already hit its limits.
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alg7_munif said:
That doesn't stop Wii from leading the sales, doesn't it?
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Exactly. Console isn't about having the best graphic a computer can render. its about the games.

Unless I've miss an official announcement by Microsoft, I don't see why they need to rush out a new console after 5 years. I kind of doubt it actually. With the cost of developing a new console ever increasing, it only make sense to stretch out their life cycle to 6-7 years or more.
 
BladeVenom said:
Makes me wonder what both companies are planning for their next generation since MS and Sony have lost so much money while Nintendo has been making an unbelievably huge amount of profits.
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I will not be surprised if both companies do the same thing Nintendo did, which is a marginal increase in hardware capabilities. I wouldn't think as marginal as the leap from Gamecube to Wii, but certainly not the massive leap we saw from the PS2/XBox generation to the PS3/360 generation.

All guesswork, obviously, but they have to at least be discussing this since selling a loss leader is obviously much more dangerous now than it was just seven years ago now that there are three major players instead of just two.

We'll see.
 
Eggothewaffle said:
Bad news: The GPU in the PS3 (along with the Xbox 360) has already hit its limits.
Click to expand...

The thing to remember is that with each passing year, programmers manage to squeeze even more performance out of console hardware. The PS2 is the perfect example. The first games came out in 2000 and looked a certain way, and by the end of the console's lifecycle in 2007 you had God Of War 2, a game that looked almost as good as, and in some ways better than XBox 360 games that were coming out at around the same time. It was litarally squeezing the last bit of blood out of that system but they managed to do it. Can you imagine trying to squeeze 2007 graphics out of 2000 PC hardware?

I expect that we'll see the same with current consoles. We're currently seeing 360 and PS3 games that visually blow away what was out at launch and that progress isn't going to stop until the hardware is retired.

Its a major major benefit to developing on a platform that is fixed for many many years, as opposed to PC game development which is constantly trying to hit a moving target, with the more successful developers generally aiming for the lower common denominator (Valve, Blizzard, Maxis).
 
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