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

Wednesday, 20 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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