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PS4 sales nearing break-even point for hardware costs, says analyst firm

Wednesday, 20th November 2013 10:40 GMT By Dave Cook

Sony is nearing break-even point for the production of PS4 consoles already, according to a report by analyst firm IHS.

It follows this initial report from the firm, which also covered the cost of building DualShock 4.

The new report is called ‘Sony Nears Breakeven Point on PlayStation 4 Hardware Costs’ and reads, “With the new PlayStation 4, Sony has produced a design whose component and manufacturing costs are starting out lower than its price tag—paving the way for the company to quickly attain profitability on hardware sales, according to preliminary results from the Teardown Analysis Service at IHS Inc.

“Furthermore, the PlayStation 4 delivers major upgrades where it counts, with a processor and memory subsystem that pushes the envelope in terms of performance and product design. The bill of materials (BOM) for the PlayStation 4 amounts to $372. When the manufacturing expense is added in, the cost increases to $381. This comes in $18 lower than the $399 retail price of the console.

“When other expenses are tallied, Sony initially will still take a loss on each console sold. But the relatively low BOM of the PlayStation 4 will allow the company to break even or attain profitability in the future as the hardware costs undergo normal declines.”

PS4 is being sold at £349 here in the UK, and launches November 29. It has sold well in the States so far, with Sony flagging 1 million console sales in its first 24-hours on sale throughout the US and Canada. Given the unit’s base price, that’s certainly a lot of money for its maker.

Andrew Rassweiler, senior director, cost benchmarking services for IHS said that while PS3 was powerful, its manufacturing costs were still high. “However, this achievement came with a major downside for Sony,” he reflected, “as the BOM costs for most of the different versions of the console were in excess of the retail prices, in some cases by more than $100. Although Sony brought the PlayStation 3’s costs down significantly during its lifetime, the company’s intent was never to make money on the hardware, but rather to profit through sales of games and content.”

With PS4, Sony’s approach is different, he said, “This time, Sony is on a greatly shortened path to the hardware break-even point, or even profitability, with its cost-conscious PlayStation 4 design. The company is pulling off this feat, despite offering a brand-new design that once again includes avant-garde components that yield superfast performance. The PlayStation 4 keeps a lid on costs by focusing all the additional expense on the processor and memory—and reducing outlays for the optical drive, the hard disk drive (HDD) and other subsystems.”

What do you make of the IHS report? Let us know below.

Via Polygon.

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11 Comments

  1. Dragon

    @Dave,
    Already reported.
    http://www.vg247.com/2013/11/19/playstation-4-costs-sony-381-to-make-according-to-ihs-report/

    #1 11 months ago
  2. Dave Cook

    @1 Read the top line again bud, this is the expanded version. That previous article was a leak. Now we have the full report :)

    Thanks though!

    #2 11 months ago
  3. Dragon

    @2,
    Didn’t see that. Sorry.

    #3 11 months ago
  4. Templar_Dante

    Mmmm… so, thats the cost of building a PS4, right? What about boxing materials? Manuals, leaflets etc, Also their not selling it to retailers at $399. Im sure they’d sell it lower, gives retail and incentive to push them out the door with sales faster.

    #4 11 months ago
  5. Dragon

    @4,
    Yes, hence on pure hardware package, they are pushing a small loss.
    However, they are gaining as much as $100 from game purchases. Right PS4 has an attach rate of 3, very good for a launch.

    #5 11 months ago
  6. Dave Cook

    @3 That’s okay :) Still appreciated!

    #6 11 months ago
  7. noamlol2

    they earn a killing over the PS4,
    AMD=cheap
    raedon graphics card=cheap

    500 gig=cheap
    1 controller and an earbud as a headset=cheap
    forcing to pay 2 play online=dick move

    don’t praise them too much…

    #7 11 months ago
  8. fengato

    Pleased for ‘em. They needed to keep costs down, and they’ve focused on the things that I care about. Unlike MS with its endless reserves, Sony needs the Playstation to be profitable as soon as possible.

    @7 Happy to pay for playing online if it allows them the breathing space to fund a stronger infrastructure. PSN downloads are still far too slow compared with XBL.

    #8 11 months ago
  9. Templar_Dante

    @5 True. They certainly need the cash.. I dont want them down and out, I hopd the PS4 is as much a success as the PS2.

    @8 I agree, happy to pay for online if it equals them upgrading it and keeping PSN competitive as the PS4 matures.

    #9 11 months ago
  10. Ilovesony

    sony kicks ass…. anyone company that can shell out a high powered system like the ps4 and keep cost to a minimum is a good thing. also I dont mind paying for online especially since most of that money will go back into the infrastructure of the PSN…. going with GDDR5 instead of GDDR3 was a genius move… and developers will find it much easier to work with then the cell was… that chip was a headache… @7 is just a hater because he reserved a xbox one and now is feeling “Reservers Remorse” Im going back to playing Killzone now…..

    #10 11 months ago
  11. The_Red

    It’s funny how Sony of all people is starting to profit from hardware sales (after expensive PS3) while Nintendo is losing money with Wii U (after cheap Wii). Hopefully they do a similar analysis for Xbox One.

    #11 11 months ago

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