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Sony expects to recoup PlayStation 4 hardware loss at launch

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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.net/articles/2013-09-20-sony-expects-to-recoup-playstation-4-hardware-loss-at-launch

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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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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.

 

Xbox One is not selling at a loss, last-gen they were selling at a loss of $126 per unit at launch according to sources which totaled to almost $3 billion (I believe the RROD warranty returns cost is also included in this total loss) this time they will make a profit from launch.

PS4 is selling at a loss again but at only $60 per unit, while the PS3 was at around $240-$306 per unit totaling to $5 billion in losses.

 

So PS4 - 400 + 60 = $460 Build Cost

Xbox One - 500 - 20 (Profit estimate) - 150 (Kinect estimate based on Xbox One dev claiming Kinect costs 'almost as much' as the console) = $230 Build Cost.

 

The $60 loss really isn't much considering everyone who buys one will buy a game (or a few) and a vast majority I believe will buy PS+ also (due to multiplayer requirement) so its likely to recover losses and make profit within the first year even though they lose money on initial hardware sales.

 

I'm also confident that the PS4 will win the larger user base because it more than doubles the pre-order numbers of the Xbox One and considering that early-adapters (Those who pre-order and buy the newest shiniest things) aren't known to be cost conscious when both consoles are available in store I see the gap getting much bigger due to the the PS4 being $100 cheaper. If Sony makes over $60 on one game sale and a subscription to PS+ getting the userbase up will make a much larger profit margin than selling the console at a profit at launch.

 

It does look like it puts Microsoft in a better position to start dropping price of the Xbox One but being stubborn ol' Microsoft I dont see it happening until a red flag is raised (maybe PS4 outselling them by way too much) even then as time passes and hardware becomes cheaper to source and production lines are refined it also brings the price down so I'm going to guess Sony will match price drops to hold dominance and because they seem to care more about long-term profits rather than short-term.

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Xbox One is not selling at a loss, last-gen they were selling at a loss of $126 per unit at launch according to sources which totaled to almost $3 billion (I believe the RROD warranty returns cost is also included in this total loss) this time they will make a profit from launch.

PS4 is selling at a loss again but at only $60 per unit, while the PS3 was at around $240-$306 per unit totaling to $5 billion in losses.

 

So PS4 - 400 + 60 = $460 Build Cost

Xbox One - 500 - 20 (Profit estimate) - 150 (Kinect estimate based on Xbox One dev claiming Kinect costs 'almost as much' as the console) = $230 Build Cost.

 

The $60 loss really isn't much considering everyone who buys one will buy a game (or a few) and a vast majority I believe will buy PS+ also (due to multiplayer requirement) so its likely to recover losses and make profit within the first year even though they lose money on initial hardware sales.

 

 

Wait, where did you get the ps4 cost numbers?  I mean if your taking their quotes, then wouldn't the loss equal the cost of one game and the cost of psn+? 

 

Also, how do we know the costs for the X1?  Yes, there is the comment about Kinect nearly costing as much as the X1 itself, but the only other info we have is that MS plans to break even or profit at launch.  We have no idea if that means they can do that even if no one buys a games, etc, of if its just like Sony in that they are saying that based on the reality that people will buy a game and pay for XBL Gold at launch.

 

 

I think your overall point is fair that its likely that Sony's costs are higher for the ps4 vs the X1 though.  Since MS is committed to keeping Kinect bundled, then MS has to deal with a high total cost, a cost that could suddenly be higher than the ps4. 

 

I wonder if the pieces of Kinect will drop in price overtime like the hardware in the consoles will.

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If everyone who buys a PS4, a PS+ Sub, and at least 1game (Which most will do)... multiply that by a couple of million... and Sony is golden...

 

Don't know if $60 is the exact figure on the loss... But its no where near the PS3 loss on sales during its launch (Which was around $200 or loss on each console)...

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If everyone who buys a PS4, a PS+ Sub, and at least 1game (Which most will do)... multiply that by a couple of million... and Sony is golden...


 


Don't know if $60 is the exact figure on the loss... But its no where near the PS3 loss on sales during its launch (Which was around $200 or loss on each console)...


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Wait, where did you get the ps4 cost numbers?  I mean if your taking their quotes, then wouldn't the loss equal the cost of one game and the cost of psn+? 

 

Also, how do we know the costs for the X1?  Yes, there is the comment about Kinect nearly costing as much as the X1 itself, but the only other info we have is that MS plans to break even or profit at launch.  We have no idea if that means they can do that even if no one buys a games, etc, of if its just like Sony in that they are saying that based on the reality that people will buy a game and pay for XBL Gold at launch.

 

 

I think your overall point is fair that its likely that Sony's costs are higher for the ps4 vs the X1 though.  Since MS is committed to keeping Kinect bundled, then MS has to deal with a high total cost, a cost that could suddenly be higher than the ps4. 

 

I wonder if the pieces of Kinect will drop in price overtime like the hardware in the consoles will.

 

Sony PS4 - Cost = $400

 + Loss (http://www.eurogamer.net/articles/2013-09-20-sony-expects-to-recoup-playstation-4-hardware-loss-at-launch_

 

Xbox One - Cost = $500

- Profit (http://www.forbes.com/sites/insertcoin/2013/09/06/at-500-microsoft-says-the-xbox-one-will-break-even-or-make-a-profit/)

- Kinect Cost (http://www.extremetech.com/gaming/161365-xbox-one-dev-claims-kinect-costs-almost-as-much-as-primary-console)

 

Unless they plan to continually upgrade the kinect with each version of the Xbox One then I expect the price of it to drop also.

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I'm also confident that the PS4 will win the larger user base because it more than doubles the pre-order numbers of the Xbox One and considering that early-adapters (Those who pre-order and buy the newest shiniest things) aren't known to be cost conscious when both consoles are available in store I see the gap getting much bigger due to the the PS4 being $100 cheaper. If Sony makes over $60 on one game sale and a subscription to PS+ getting the userbase up will make a much larger profit margin than selling the console at a profit at launch.

 

 

Well that comes down to how many more ps4s sell vs the X1.  Since the X1 will also be selling Gold subscriptions with its software sales, it will have that profit margin as well.

 

Since your confident that the PS4 will double the sales numbers of the X1, then that would certainly point to a big win for Sony.  That kind of gap could be enough to get MS to cut prices sooner. 

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Sony PS4 - Cost = $400

 + Loss (http://www.eurogamer.net/articles/2013-09-20-sony-expects-to-recoup-playstation-4-hardware-loss-at-launch_

 

Xbox One - Cost = $500

- Profit (http://www.forbes.com/sites/insertcoin/2013/09/06/at-500-microsoft-says-the-xbox-one-will-break-even-or-make-a-profit/)

- Kinect Cost (http://www.extremetech.com/gaming/161365-xbox-one-dev-claims-kinect-costs-almost-as-much-as-primary-console)

 

Unless they plan to continually upgrade the kinect with each version of the Xbox One then I expect the price of it to drop also.

 

 

Ah ok, that explains it then, thanks for sharing that. 

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Sony PS4 - Cost = $400

 + Loss (http://www.eurogamer.net/articles/2013-09-20-sony-expects-to-recoup-playstation-4-hardware-loss-at-launch_

 

Xbox One - Cost = $500

- Profit (http://www.forbes.com/sites/insertcoin/2013/09/06/at-500-microsoft-says-the-xbox-one-will-break-even-or-make-a-profit/)

- Kinect Cost (http://www.extremetech.com/gaming/161365-xbox-one-dev-claims-kinect-costs-almost-as-much-as-primary-console)

 

Unless they plan to continually upgrade the kinect with each version of the Xbox One then I expect the price of it to drop also.

why would the Kinect cost won't go down with the console even if they don't redesign the plastic case?

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