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Report: Sony Taking Smaller-Than-Expected Loss on PS4 Sales

19 Nov, 2013 By: Chris Tribbey

When Sony first started selling its PlayStation 3 consoles, the company was selling them at a loss, and the same was expected when the company debuted the PlayStation 4 this month.

However, according to a teardown analysis from research firm IHS, the PS4’s design has component and manufacturing costs starting out lower than its $399 price tag. IHS pegs material and manufacturing costs at $381, and considering other expenses, Sony will still take an initial loss on the consoles.

“When Sony rolled out the original model of the PlayStation 3 in 2006, our teardown analysis revealed that the console delivered supercomputer-class performance at a price equivalent to a notebook PC,” said Andrew Rassweiler, senior director of cost benchmarking services for IHS. “However, this achievement came with a major downside for Sony, as the [bill of materials] 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.”

This time around, Sony has a smaller road to travel to break even, Rassweiler said.

“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,” Rassweiler noted. “Despite the remarkable silicon acreage of this device, it comes at a price point attractive to mainstream consumers while delivering a very high level of performance. Future versions, manufactured with even more advanced semiconductor processing technology, will further enhance both cost and performance.”

The optical drives used in the PS4 are less than half the cost of those used in the PS3, and Sony was able to reduce the number of small-sized integrated circuits, discrete semiconductors and passive components in the PS4, compared to its predecessor.

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