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Sony expects to recoup PlayStation 4 hardware loss at launch


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#1 Audioboxer

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Posted 20 September 2013 - 11:32

PlayStation 4 hardware will make a loss at launch, but Sony expects to immediately recoup the costs when a typical user also buys a PlayStation Plus subscription and at least one launch game.
 
Sony Japan executive Masayasu Ito made the comment to Eurogamer today in an interview at the company's Tokyo headquarters.
 
Eurogamer has heard from well-placed sources that Sony expects to make an approximate $60 loss per $399 unit sold. When presented with the figure, Ito denied it - but only because the company expects a typical user to buy a console with these other items.
 
Ito would not be drawn on whether more than one launch title would need to be bought before the whole equation resulted in Sony making money, just that the company expected to turn a profit on an average user's initial purchase.
 
The purchase of one launch title and a Plus subscription would indeed total close to, if not more than, the $60 mark.
 
But even without the purchase of these items, PlayStation 4 will incur a profit at a sooner point than PlayStation 3, Ito concluded.
 
Nintendo made a similar comment prior to the launch of Wii U - its console was also sold at a loss but would become profitable with the purchase of a single game.
 
Last month Sony Computer Entertainment boss Andrew House said he expected PlayStation 4 launch-related losses to come in below those of the PlayStation 3.
 
Chief financial officer Masaru Kato added at the time that because the PS4 features PC-like architecture - as opposed to the custom components featured inside the PS3 - the cost of production is "much, much smaller".

 

 

http://www.eurogamer...-loss-at-launch




#2 BajiRav

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Posted 20 September 2013 - 13:27

Kind of offtopic but this gives credence to the Kinect costs as much as Xbox One. Microsoft selling at small profit means their actual pricing is in the same ballpark as Sony with PS4.

It probably means Sony will quickly lose its price advantage unless they keep the loss with further price reductions.



#3 OP Audioboxer

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Posted 20 September 2013 - 13:28

Kind of offtopic but this gives credence to the Kinect costs as much as Xbox One. Microsoft selling at small profit means their actual pricing is in the same ballpark as Sony with PS4.

It probably means Sony will quickly lose its price advantage.

 

Not unless MS start selling without Kinect at the same price. Without Kinect it could probably even be cheaper. GDDR5 RAM and a better GPU will cost Sony more.



#4 BajiRav

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Posted 20 September 2013 - 13:32

Not unless MS start selling without Kinect at the same price. Without Kinect it could probably even be cheaper. GDDR5 RAM and a better GPU will cost Sony more.

I meant, PS4 costs Sony $460, Xbox costs Microsoft sub $500, let's say $480 for comparison's sake.

In 1 year, if their costs per console drop down to $400 each, Sony is just break even but Microsoft is still making profit at $500.



#5 OP Audioboxer

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Posted 20 September 2013 - 13:35

I meant, PS4 costs Sony $460, Xbox costs Microsoft sub $500, let's say $480 for comparison's sake.

In 1 year, if their costs per console drop down to $400 each, Sony is just break even but Microsoft is still making profit at $500.

 

So you're talking on the business side not consumer? I thought you meant consumer side advantage. I don't really care about business side as long as no one is going to bleed billions, and quite frankly that's obvious that isn't going to happen again.



#6 Brian M.

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Posted 20 September 2013 - 13:34

I meant, PS4 costs Sony $460, Xbox costs Microsoft sub $500, let's say $480 for comparison's sake.

In 1 year, if their costs per console drop down to $400 each, Sony is just break even but Microsoft is still making profit at $500.

 

The cost will steadily decrease for both platforms. I'd expect each to be making profit on each unit within 18 months or so.



#7 BajiRav

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Posted 20 September 2013 - 13:38

So you're talking on the business side not consumer? I thought you meant consumer side advantage. I don't really care about business side as long as no one is going to bleed billions, and quite frankly that's obvious that isn't going to happen again.

I meant consumer side but left my post dangling. :blush: I am guessing Microsoft will be able to drop price faster than Sony and their per unit costs will be at par with Sony --> leading to price parity or advantage in market (consumer side).

 

The cost will steadily decrease for both platforms. I'd expect each to be making profit on each unit within 18 months or so.

That's true. All I am saying is that Microsoft will be able to drop price faster than Sony.



#8 OP Audioboxer

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Posted 20 September 2013 - 13:54

Unless they stop bundling Kinect they'll always have it's costs. Internals tend to drop in price due to shrinking components, removing unnecessary parts and making the console smaller. It's going to take longer for Kinect to drop in price than the console IMO.



#9 BajiRav

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Posted 20 September 2013 - 13:56

Unless they stop bundling Kinect they'll always have it's costs. Internals tend to drop in price due to shrinking components, removing unnecessary parts and making the console smaller. It's going to take longer for Kinect to drop in price than the console IMO.

Same thing should happen with Kinect. A bunch of cameras, sensors and its own processor.

#10 OP Audioboxer

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Posted 20 September 2013 - 13:59

Same thing should happen with Kinect. A bunch of cameras, sensors and its own processor.

 

Did they ever redesign the Kinect One though? The PS Eye never changed but it was small to begin with. I'm not saying its cost is static, I just think the bigger margin will drop on the consoles vs accessories.



#11 trooper11

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Posted 20 September 2013 - 15:02

So they do admit they will be taking a loss on each unit sold, but they expect to make that up if the user pays for ps+ and say buys one game.  That tells me they aren't losing much per unit.

 

So like MS, Sony decided that this gen they would not bleed millions and hope that game sales, etc recoup the costs down the road.  Its not quite the Nintendo strategy since they actually profit from day one, but it seems like both decided they were not willing to cut down the hardware to a level that would avoid any loss.  That's good for us gamers though, because it means better hardware.

 

 

It'll be interesting to see who pulls the trigger to drop their price first. I would imagine both are very tempted to sit on these launch prices as long as possible to maximize profit considering how much either has lost in the past.



#12 vcfan

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Posted 20 September 2013 - 15:24

Not unless MS start selling without Kinect at the same price. Without Kinect it could probably even be cheaper. GDDR5 RAM and a better GPU will cost Sony more.

 

the GPU will not cost more. the cost of the die relies on how many of them you can get out of a wafer, and yields. the xbox one SoC die size is massive,and way bigger.



#13 BajiRav

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Posted 20 September 2013 - 15:29

Did they ever redesign the Kinect One though? The PS Eye never changed but it was small to begin with. I'm not saying its cost is static, I just think the bigger margin will drop on the consoles vs accessories.

I don't think cost reductions have anything to do with physical size (case plastic wouldn't be that costly to start with). If they start saving on sensors, processors and cameras - the price will go down even if the physical size doesn't change.



#14 BajiRav

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Posted 20 September 2013 - 15:31

the GPU will not cost more. the cost of the die relies on how many of them you can get out of a wafer, and yields. the xbox one SoC die size is massive,and way bigger.

 

On top of that - I read on "the internet" (so must be true) that this time both Sony and Microsoft don't "own" their processors and they are buying using "silicon" model from AMD. This is because AMD itself licenses x86 architecture from intel (and hence can't license it downstream).

If this is true - any yield issues or savings on die should not be a concern for either Microsoft or Sony. They pay per chip and don't have to worry about manufacturing problems.



#15 Houtei

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Posted 20 September 2013 - 15:32

Did they ever redesign the Kinect One though? The PS Eye never changed but it was small to begin with. I'm not saying its cost is static, I just think the bigger margin will drop on the consoles vs accessories.

The kinect one is an accessory.  The kinect two is part of the system and people need to stop thinking of it otherwise. If they sell without kinect it would be an incomplete system.  It is how they designed it and how they want it.  Not surprised the ps4 is selling at a loss since they have a more powerful gpu in their system and selling for 399.  I would imagine though Microsoft would be in a better position to cut cost sooner since they will be making profit on everything.





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