14 DAY TRIAL // Few gamers are aware of the fact that selling gaming consoles is a risky business. A console takes years and a lot of money to be designed and for working prototypes to be created. Then, a console can fail in the first year it is put on sale because of limited hardware power or because of limited support from videogame publishers. And even if the console sells well and is quickly adopted by players, manufacturers tend to lose money on each gaming device sold.
iSuppli, a research firm, analyzed the latest PlayStation 3 from Sony and concluded that the company had made significant progress related to its console. It seems that the initial PS3 model, which was sold to players for 600 dollars cost over 800 dollars, which means that Sony basically lost 200 dollars on each device sold.
Over time, the Japanese manufacturer has managed to significantly reduce costs. On the one hand, it has reduced the number of parts in the gaming device, from 4,048 to 2.820. On the other hand, components have been consolidated and manufacturing costs for most of them dropped. This means that, at the moment, the manufacturing cost of a PlayStation 3 console is around 448 dollars, which translates into Sony losing around 50 bucks on a console that it sells for 399 dollars.
Andrew Rassweiler, an analyst with iSuppli, says that, in 2009, Sony might even achieve parity, selling its console with a price tag equal to its manufacturing costs. He believes that “Every time we do a teardown, it's sort of backward-looking. Sony is one step ahead of us and probably has plans to re-spin the hardware to reduce the costs yet again.”
Microsoft is also thought to lose money on each Xbox 360 it sells, although no breakdown is available at the moment.