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[infiniteheteroskdasticity]

Maybe but I doubt it. I'm also fairly certain that once you add in sunk costs like system software/services and R&D, they're not making much of a profit (if any) on each box. Like most other consoles, the margin will be on games and services.

 

[Wer34truh]

I can't imagine Sony making much of a profit per console sold at this stage. It is common practice to undersell the console and make up for it by licensing fees down the road. But yes, in 2-3 years the PS4 will be incredibly profitable per unit sold, just as the PS3 is incredibly profitable now. The difference, of course, is that expected game-sales for the PS4 are significantly larger than the expected game-sales for the PS3 thus making the lower profit-margin acceptable.

As far as the Wall Street Journal's article goes I don't give it a lot of credit without accounting for shipping, development and the ever-present cost of running online servers. Sony will gross a lot of $ per console, just not yet.

 

[Haint]

This doesn't include research and development, marketing or distribution. I'd say they're breaking even on the console.

How do you include R&D on a console that'll sell unknown numbers over 10 years, or front loaded launch marketing which has value beyond the first X consoles or the next X months. You can't, which is why it can't be fairly or accurately used in these kind of discussions.

 

[Lagspike_exe]

Samsung are prepping 8Gbit GDDR5 chips btw, will be ready by the end of next year.

HDD is already at base price, and higher than what these idiots have it at. No way Sony are getting a 500GB single platter drive for that kind of price.

PSU will go down in price as the power requirements go down in price.

The APU is built on 28nm CMOS bulk from TSMC, the equivalent 20nm process won't be available until 2015 so the price of that is set for at least two years. From what I have been able to gather the yield on the main APU for Sony is higher than 70% so there are only marginal cost gains to be made in that area.

The Blu-ray drive is at base cost.

The accessory costs will go down over time, and if the product is successful the assembly costs will go down also. However, given how many dud units are out there right now I could see the QC costs going up in the short term to weed out bad units.

So, we'll most likely see value-added bundles next year abd a proper price cut in late 2015 in time for Xmas shopping, right? That seams reasonable more or less.

 

[Espada]

I can't imagine Sony making much of a profit per console sold at this stage. It is common practice to undersell the console and make up for it by licensing fees down the road. But yes, in 2-3 years the PS4 will be incredibly profitable per unit sold, just as the PS3 is incredibly profitable now. The difference, of course, is that expected game-sales for the PS4 are significantly larger than the expected game-sales for the PS3 thus making the lower profit-margin acceptable.

As far as the Wall Street Journal's article goes I don't give it a lot of credit without accounting for shipping, development and the ever-present cost of running online servers. Sony will gross a lot of $ per console, just not yet.

2-3 years? I wouldn't be surprised if they're making a profit if someone gets a PS+ subscription or buys a game. The PS3 took forever to break even because it was an idiotic mess from top to bottom. Everything was costly to produce in that thing.

 

[AOC83]

So is your point that Nintendo made a bad console because it's not very powerful? Because that isn't what this thread is about.

Almost all of these estimates prove to be very low, or don't effectively take in to account any other variable or fixed costs. The pattern is as follows:

1) New console releases
2) An analyst tries to break down cost of production and shows that the system costs 80 dollars less to make than it sells for
3) Console maker proceeds to post net loss

So perhaps these analyses are correct, but it's certainly mysterious how they always have very low estimates which should produce profits but don't.

No. My point is that Nintendo made a console that is laughably expensive for it´s power and features (if we can trust their statements that is of course).

 

[Pseudo_Sam]

No. My point is that Nintendo made a console that is laughably expensive for it´s power and features (if we can trust their statements that is of course).

"Too expensive for it's features" is, of course, entirely subjective. I think we all know your opinion on that by now.

But there's no way Sony is making $100 per console. No way. Contradicts their own statements in fact. These estimations are always lowballed (happened with the WiiU as well).

 

[AOC83]

"Too expensive for it's features" is, of course, entirely subjective. I think we all know your opinion on that by now.

But there's no way Sony is making $100 per console. No way. Contradicts their own statements in fact. These estimations are always lowballed (happened with the WiiU as well).

The WiiU lacking a HDD is not exactly "subjective".

And of course Sony isn´t making that money per console. Even if we take the sum for granted there woud still be retailer margines, taxes etc.

 

[Pseudo_Sam]

The WiiU lacking a HDD is not exactly "subjective".

And of course Sony isn´t making that money per console. Even if we take the sum for granted there woud still be retailer margines, taxes etc.

Of course that's not subjective. Whether or not the price of the console is worth the utility of the features/components is, though.

Anyways I wonder what the point of these estimations is when it's obvious every time that there are hidden costs, margins, ect. that render them 100% incorrect 100% of the time.

 

[Thunder Monkey]

Why-o-why am I not shocked to see freezamite and AOC trying to turn this into a WIiU thread? Different ends of the spectrum but the derail is the same.

Anyway, I wouldn't doubt this is close to true. Sony went smart this generation. They've got a design that should be profitable very quickly.

Honestly their smartest hardware design since the PSOne.

 

[StevieP]

Hahaha. No

 

[Gskyace]

I guess those designers don't even earn any money.

 

[Yamauchi]

iSuppli also said the 3DS only cost $100 to manufacture at launch, which was not correct based on Nintendo's figures. They are correct in terms of the total hardware cost, but not the total cost to the console maker.

Regardless, if Sony is even breaking even on the PS4, that is quite a feat.

 

[teh_pwn]

If you're using hardware that is levels of magnitude faster, then why would developers be bothering to target the slower console? Even if the PS4 and the PS5 use the same architecture, it wouldn't make any sense for developers to just use the hardware as a PS4.5, and besides, Sony probably wouldn't care for that approach, because it'd be a lot of work for them that they've never had to do before. They're used to custom OS' on every console, why buck the trend?

PS5 could use higher level APIs to meet parity of PS4.x titles if there are too many changes in design, which I'm not familiar with happening with PC gaming. The purpose of PS 4.x would be to use the same API and same exact architecture to beef up graphics Iterative releases, like iOS/Android.

I do not think we are talking about the same thing anymore, and I don't feel like typing a huge post again only for you to tell me I don't know what I'm talking about while lecturing me on more programming buzzwords that I have already used and understand (and think very little of when it comes to getting shit done, frankly).

No, we are talking about the same thing; we were talking about the cost and plausibility of supporting multiple hardware revisions that have different levels of specs. To which you talked about the profitability not being there for backwards compatibility. To which I replied it's way cheaper to use the same hardware architecture, reuse code between generations, and leverage widely used software development practices such as CI to automate testing of multiple hardware revs than it is to reinvent game engines every generation for wildy exotic hardware. To which you replied on 2 occasions that CI and Agile software development are buzzwords, with is utter nonsense. You have no idea what you're talking about. You cannot have a different set of facts/reality - Agile Software Development is widely used as is CI. CI is designed to avoid integration hell by rapidly building, testing, and reporting code changes. Right now there are hundreds of distributed builds and testing going on at Google in response to every code change they make. That's how you handle multi-platform testing. It isn't a novel thing. It's highly trivial, and is way less costly than brute force testing things by hand.

Edit: When I say you have no idea what you're talking about, I'm specifically referring to your random belligerence to CI and Agile. It's like denying that global warming is a thing. It's insane. I do CI for a living. You're free to express your opinions about speculation to future platform architectures/etc.

 

[Wer34truh]

2-3 years? I wouldn't be surprised if they're making a profit if someone gets a PS+ subscription or buys a game. The PS3 took forever to break even because it was an idiotic mess from top to bottom. Everything was costly to produce in that thing.

I was exclusively talking about the profit margin for hardware sales. not about additional royalties and service fees. If one included those into the calculation then you are absolutely right.

 

[outunderthestars]

Does anyone know what the wholesale price of a PS4 is at this point?

I can't imagine retailers are paying $400 for them...

 

[itsgreen]

Does anyone know what the wholesale price of a PS4 is at this point?

I can't imagine retailers are paying $400 for them...

They pay very close to that... margins aren't made on hardware...

 

[Guess Who]

BASIC ACCOUNTING: R&D AND MARKETING ARE NOT INCLUDED IN GROSS PROFIT.

Yup. This article is just saying that after the money goes towards paying for manufacturing, $100 of it goes to Sony. Of course, that doesn't mean that $100 is going straight to the bank - they have to pay their employees and operating costs with it as well. Whatever is left after that - which, from the way Somy would tell it, is basically nothing - is what most people think of as "profit".

 

[SquiddyCracker]

This is a pretty great thing!

It just means they'll have an easier time lowering it in price, unlike Microsoft.

 

[MrCunningham]

What about packaging, shipping and development costs?

Yeah, generally with shipping, packaging and the cost of assembly, they are not going to gross that much per unit sold. Though with Foxxcon using cheap Chinese University Student labour.... eh you never know.

 

[Road]

Sony has said multiple times they are losing money.

I'll go with their word, since I imagine they would actually be screaming to all corners of the world so their investors could hear if they weren't losing money on each PS4.

 

[Jac_Solar]

They don't make 100$ per console - that might be the difference between the factory cost and the price a consumer is expected to pay, but it ignores, as some have already mentioned, the cost of assembly, packaging, shipping (They can't use the postal service.), storage, marketing, paying the people who make the deals with the stores and sets up the contracts, and the price stores are expected to pay per console.

Most likely, the more units a store buys, the less they pay for the individual unit. (Ie, they buy 100.000 units, they pay 250-300$ per unit, but if they only buy 2 units, they pay 400$ per unit.)

Say that it takes an experienced worker 10 minutes to assemble a PS4 - that's, at the most, 6 units per hour - most likely 4-5. Say it's 5 units every hour, and the worker makes 10$ per hour. At 2 dollars per unit, that means that 50 million units sold would equal 100 million dollars in man hours for the assembly, at the very least.

 

[flkraven]

Doesn't include R&D, marketing, and infrastructure costs which are not an insignificant number I'm sure. Does this include the cost of the controller, headset, and packaging as well?

 

[LOLCats]

Don't under estimate scalpers.

Ya but the scalpelrs sell to people buying games. Matter not really there was another party involved.

 

[Liha]

296 $ -> 219,37 € + 43,88 (20 % Tax) = 263,25

400,00 €
- 263,25 €
136,75 € price difference

 

[Glorified G]

Yes, using generic parts that can be found on the PC, so you have a closed PC that won't evolve during at least 7-8 years.
No, while I would like and enjoy that Nintendo had gone a bit more far in terms of processing power, what made the consoles somewhat special was precisely the ability to adopt non-standard approaches that could produce surprising results.

This "grab a PC and put it into a console box" trend that started with the first Xbox has never been a good way to approach things in my opinion. I mean, the GC being a customized design made some crazy things that even the generic and much more expensive design of the first Xbox never achieved.

And that's what I want from a console. To a PC, I already have a PC.

I can totally grab an APU with a separate pool of 8GDDR5 and put in a PC and make it work.

What Sony should have done instead is take 2GB of DDR3 and make it half as slow as the DDR3 in their previous console, take 14 year old CPU and put just enough R & D make sure it barely competes with current gen and try to make the console as small as they can for whatever reason. Oh yeah, forgot about manufacturing a low resolution single touch controller with a resistive screen. Such exotic hardware

I'm detecting lifetime supply of NaCl- sorry your favourite company can't design cost effictive console forcing you to pay for past gen power at next gen prices.

You put it much better than I did

 

[Imperfected]

It's not entirely true that "sunk costs" aren't accounted for. To some degree they consider the cost of setting up and running fabs in the margin on a console, which is why that over time (ie, the more time the fabs have been operational) and with a greater than expected number of sales the consoles become "cheaper" to produce.

To look at it another way: Nintendo expected the Wii-U to "cost" less to produce right now than it currently does, because they expected to move quite a few more units. They expect to recoup the expenditures on many manufacturing-related expenses - setting up fabs, preparing logistics on assembly and supply lines - by selling a certain number of units, and if they have shortfalls the units effectively become more expensive to produce: they're spending the same amount on those facets of hardware manufacturing, but not making the same operating profit they expected to recoup the expenditures. That's why the poor sales of the Wii-U are directly responsible for the console still causing Nintendo a significant loss on sale, when they had anticipated selling them for a profit by now.

R&D may be sunk costs, but their projections for dollar loss on each system sold are directly tied to their sales projections: if they outsell their predictions, their profit per system is slightly higher; if they undersell, the profit per system is slightly lower. That's just economics of scale at work.

 

[zomgbbqftw]

So, we'll most likely see value-added bundles next year abd a proper price cut in late 2015 in time for Xmas shopping, right? That seams reasonable more or less.

Depends on demand really. There was 30m worth of PS3 demand at prices higher than $299 and the PS4 is a lot more popular than that so I think it could be 2016 until Sony drop the price at all.

 

[prag16]

The Wii U was estimated low too.

This. When somebody did something like this for Wii U iirc they estimated $180, yet Nintendo was selling at a slight loss at $350.

Wouldn't be surprised if it was the same deal here. The "one game and a Plus subscription to get into the black" report sounds far more believable.

 

[Ryu751]

Add in the controller, packaging, and shipping it seems to be almost even. R&D are not factors in cost, neither is infrastructure. Those are investments. Last stores make almost nothing on the console maybe twenty bucks if that.

 

[Final Boss]

I thought for sure they'd take a loss initially

 

[Tux]

Wat. Your logic makes absolutely no sense.

What makes you think Sony weren't taking into account retailer margins when they made the statement? To not do so would be incredibly stupid. And it's not like retailers earn much off consoles anyway, they sell them absurdly close to at cost and try to make money on the software.

Not only that but they also never specified that they had to sell a first party game to break even, so there's no reason to make the assumption that they do. And Sony makes 20% off every third party game sale.

Actually I have no clue to what point you are trying to make? Are you saying that Sony is losing money per console sold? Are you saying that they are breaking even after each software game sold? Making money per console sold after each game sold? Ok, how much? What have you calculated? Lets go. Post it. What are your estimates?

This is really a non-story. But I'd like to hear your agenda on this matter. What's your position?

All I cared about is that Sony was losing only $60 per console sold at launch (even $100 per console sold would have been ok too). This is GOOD NEWS for Sony! The PS3's launch loses were upwards of between $240 and $310, which meant it was $900 to manufacture. Yet, Sony still managed to cut cost along the way.

Even if Sony was losing $100 per PS4 retail sale, this is not even in the same stratosphere as the PS3's loses. So, chill out. This is good news for Sony even if the OPs story turns out to be incorrect.


http://www.techdirt.com/articles/20061116/085020.shtml

http://betanews.com/2006/11/16/playstation-3-loses-as-much-as-307-per-unit-sold/

 

[satam55]

Sony has said multiple times they are losing money.

I'll go with their word, since I imagine they would actually be screaming to all corners of the world so their investors could hear if they weren't losing money on each PS4.

No they haven't! They always talked around the issue.

 

[ShinMaruku]

Watch and learn Nintendo. This is how you build a console.

Nintendo has been doing this for years. It's when 3ds and wiiu they went arry

 

[googleplex]

Yeah..no way these numbers are anywhere close to accurate. They're totally low balling the prices.

 

[KoopaTheCasual]

 

[Aeroangel]

They forgot the headset $0.10.

I laughed... So true.

 

[SixStringPsycho]

Was talking about this with some friends of mine. My estimate was $150-$200 per console. But a $100 good. In its lifetime. It'll make more. Console is greatly built.

 

[Road]

No they haven't! They always talked around the issue.

http://www.eurogamer.net/articles/2...-recoup-playstation-4-hardware-loss-at-launch

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 games. Sony Japan executive Masayasu Ito made the comment to Eurogamer today in an interview at the company's Tokyo headquarters.​

http://arena.ig.com.br/2013-10-21/n...o-ps4-a-esse-preco-diz-executivo-da-sony.html

Na verdade já existe um subsídio maior do que esse, porque o custo de produção de um PS4 é muito superior a US$ 390. Então existe lá no começo da cadeia um subsídio global nosso e no fim da cadeia um subsídio de distribuição, da Sony Brasil​

My translation: "Actually, there already is a subsidy bigger than this [the one in the Brazilian price] because the production costs of a PS4 are much higher than $390. So, there's a global subsidy in the beginning [when the PS4 is sold for $390] and more at the end [the final price to the consumer in Brazil] of the chain.

 

[apana]

It would kind of suck if Sony is passing on the cost to the consumer instead of selling the product at a loss which is in line with tradition. That being said, I tend not to believe this estimate. I think they are probably breaking even.

 

[StevieP]

Hilarious that this has become a troll thread against the other 2 consoles when the original estimate is bull in itself. It's as though people were all pent up with reasons to troll other consoles and needed to let it out.

 

[HovaHovito]

This doesn't include research and development, marketing or distribution. I'd say they're breaking even on the console.

Why would they include that
This just illustrates the money theyre making on the console

 

[HovaHovito]

They are wrong.

Lel
Im sure theyre not

 

[Demon Ice]

Yes, using generic parts that can be found on the PC, so you have a closed PC that won't evolve during at least 7-8 years.
No, while I would like and enjoy that Nintendo had gone a bit more far in terms of processing power, what made the consoles somewhat special was precisely the ability to adopt non-standard approaches that could produce surprising results.

This "grab a PC and put it into a console box" trend that started with the first Xbox has never been a good way to approach things in my opinion. I mean, the GC being a customized design made some crazy things that even the generic and much more expensive design of the first Xbox never achieved.

And that's what I want from a console. To a PC, I already have a PC.

There are no generic parts that can be found in a PC in the PS4, apart from the hard drive and blu ray drive.

 

[Quasar]

Why would they include that
This just illustrates the money theyre making on the console

See to me a parts cost of 300 just illustrates that they probably are losing 60$ a unit. R&D, marketing and distribution costs probably pushes the price to somewhere near the supposed Sony staff price of 388. And Sony would have to the wholesale price a bit below that. Dunno how much. Maybe as low as 350, esp for volume guys like amazon. Would the margin be as slim as $11?

 

[HovaHovito]

See to me a parts cost of 300 just illustrates that they probably are losing 60$ a unit. R&D, marketing and distribution costs probably pushes the wholesale price to somewhere near the supposed Sony staff price of 388. Would the margin be as slim as $11?

Theres really no good way to estimate r&d and distribution without an inside source. Its pretty clear this is just meant to illustrate the cost of the ps4's hardware and nothing else

 

[Demon Ice]

The cost analysis in the OP also leaves out the controller.

 

[TheLostBigBoss]

 

[BibiMaghoo]

They forgot the headset $0.10.

The cost analysis in the OP also leaves out the controller.

Failure.

 

[jts]

"no its gotta be more expensive i sware on me mum"