Sony's PS3 Plan: Lose $300 On Each Unit, But Make It Up In Volume

from the backwards-math dept

Much has been made of Sony's ongoing supposed turnaround, and the Playstation 3 was supposed to play a significant role. But between the Sony battery fiasco and the multiple delays of the PS3 launch, the company's still treading water. Now, just as the PS3 is (finally) going on sale, an analyst report says Sony will lose between $240 and $310 on each unit it sells, even with its high starting prices of $500 and $600. It's common for game consoles to be sold at a loss at first, until economies of scale come into play and bring manufacturing costs down -- for instance, the same analysts say a year after its launch, Xbox 360 unit sales now likely generate a small profit for Microsoft. This means that companies have to make up the difference with game sales, and the huge loss on each PS3 means that it needs to get an "attach rate" -- the average number of games a consumer buys along with the system -- of 6. Analysts consider 4 to be high, and 3 to be the average rate, so Sony's got quite a challenge on their hands, particularly when you consider the high cost of the system, and the growing cost of games. Games for new systems are getting more expensive, and they continue to be developed for and marketed to the core gamer demographic, focusing on technological achievement over everything else. But is this an increasingly niche market? Nintendo's gone the other way, attracting a wider audience to gaming by keeping prices low and focusing on less flashy games with a lot of attention on the gameplay itself. Of course, its next-generation console, the Wii, is also out soon, setting the stage for an interesting tussle between the two strategies. One final footnote about the PS3: its second most expensive component, at $125 -- and apparently the one also responsible for many of the delays -- was that oh-so-awesome Blu-ray optical disc drive. All in all, the PS3 sounds like a masterstroke: delay the launch for an expensive component that nobody really wants anyway, and kill your margins even more in the process. Looks like we'll still be waiting a while for that Sony turnaround.

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  1. identicon
    Andy, 21 Dec 2006 @ 1:40pm

    Shut up about the Xbox 1.5

    I'm sick of people saying the 360 is xbox 1.5. It is true that there are features from the first xbox, such as ethernet support, an included hard drive (pro system), a unified on-line game service, and a few others to name a few. And it is also true that the Play Station 3 is including these features even through the playstation 2 didn't. When the sony exec coined the term xbox "1.5" he didn't account for the fact that it didnt have to be completely redesigned becuase the previous version had so many great features. Other than the built in wi-fi sony has copied every new feature from other companies (except possibly the idea for wireless controllers). As for being able to play Blue Ray movies in 1080p, i who cares. Very few people have the TV to support it, we aren't sure which technology will win out, and finally, microsoft chose not to drive up the cost of their console by addinf a feature VERY FEW people need at this point. If the playstation 2 had been as good as the xbox to start with then the playstation 3 would be only the playstation 2.5

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