PS3 will turn profit in 2009 – price drop imminent
The latest teardown analysis from iSuppli reveals that the PS3 is indeed near break-even manufacturing costs. Several clues have been presented over the past few months that have indicated this, such as Sony’s financial report. Could a price drop be imminent? It definitely seems that way.
I wrote a story earlier this month stating that the PS3 was close to breaking even after interpreting what SCEE President, David Reeves said. Some of our readers even accused me of misinterpreting Reeves, stating that I was confusing accumulated loss with manufacturing costs. This is ridiculous, considering corporations calculate loss on a quarterly basis.
I even came to the conclusion that the PS3 must be very close to breaking even after studying the financial reports back in October here. It made sense considering software sales were comparable but operating loss was reduced by 60 percent. I really do hate to gloat and say “I told you so,” so I won’t do that.
According to the research firm, iSuppli, the PS3 now costs $448.73 to manufacture, merely $48.73 more than the actual selling price. Originally, iSuppli estimated that the cost to manufacture the PS3 was $805 with a $499 price tag in 2007. iSuppli says that Sony may reach break-even point with the PS3 in 2009, which is exactly what Dave Reeves eluded to earlier this month.
The PS3 may have already reached break-even costs as far as anyone knows, considering that iSuppli uses estimated cost of parts in accordance with the industry. However, since Sony owns many of the manufacturing plants that create the components, costs could be a little lower than estimates.
iSuppli analyst Andrew Rassweiler states, “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.”
This is exactly what I wrote earlier this month:
However, once the break-even point is reached, the company can start aggressively competing with price. Reeves stated, “Next year we are probably going to be a little bit more aggressive when we reach the break-even point.â€
This is definitely a big clue that a price drop may be coming near the end of 2009. However, in the meantime, Sony has been suffering sales wise throughout the holiday season because the company refuses to drop the price. I believe if Sony doesn’t react soon enough the PS3 will be in some serious trouble in 2009.
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29 Responses to “PS3 will turn profit in 2009 – price drop imminent”
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December 24th, 2008
Ouch! Somebody just got pwnd!
“kev:
October 29th, 2008
wtf? nowhere does sony state they are close to breaking even, yet Mike uses his “belief†as fact.
more nonsense from the sony fanboys…
all he’s done is make unsupported speculation and you fanboys lap it up…
priceless….”
“kev:
December 5th, 2008
phranc – you’re 1/2 right..which is closer than ever. the fact mike is confused on breaking even on hardware costs vs. breaking even on the 3 billion in losses sustained by sony due to the ps3, shows once again, how clueless and easily sold this fanboy is.”
yes, priceless indeed.
December 25th, 2008
Huh?
At the start of the year it was reported by many outlets that the cost of the PS3 had already halved.
Oh well, whatever. Anything to show up kev sure is priceless!
December 25th, 2008
what sony needs to do is make an arcade version like 360 and take away some features to lower the cost to make it and sell it for cheap to compete cause besides features they dont have much as far as games go….
December 25th, 2008
@kevo
You want them to cut more things out of the PS3? How will that be a good thing? Does 360 arcade really sell that much?
December 25th, 2008
3 years after a console is released, it may start to break even.
A price drop may occur for this console, which also happens to be the most expensive, sometime in late 2009 or early 2010.
Wow.
Um, correct me if I am wrong, but won’t we be looking forward to the next generation of consoles by that time?
Sorry, I just had to go there. Considering the PS2 should be getting phased out next year or the year after, hopefully they do a redesign on PS3 as they did with PS1 and 2.
And hopefully that redesign will included proper emulation or the Emotion Engine put back in for backwards compatibility.
This, combined with the planned extended lifetime of the console should eventually (2-3 years maybe) get them on the road to major sales and a serious overlap with PS4.
On the streamlined PS3, perhaps a version without a hard drive and a 1 or 2 GB memory card would suffice for game saves… or they could just go back to a 20 GB Hard Drive instead of a 60 in order to help reduce cost.
ColinXavier,
I’m pretty sure the 360 arcade sells a fair amount, especially with the deals they have going on for hard drives and Live now ($30 20GB w/Gold).
December 25th, 2008
@CarlB
A redesign sure, but not with less Hard Drive space. That’s the reason they took out the 40 gigs and put in the 80, they were cheaper. It cost more to get 40 gigs ’cause it was older. Could you buy a 100 mb harddrive nowadays. Not usually. And I doubt very seriously if sony would ever go back to the memory card, even if flash drives start to hold 20 gigs, that wouldn’t be enough space for installs and saves.
December 25th, 2008
Could be Carl…though both MS and Sony have said that this generation will be the longest.
But then if MS do come out with a new console, it will surely have to be more expensive than the then cheaper PS3?
I think the rumoured March price cut is accurate, given that the PS3 should be on the 45nm chip by then, so that’s when it may get slimmed.
Though hopefully a new slim PS3 won’t feel as flimsy as the slim PS2.
Interesting though that its only ever Sony who are expected to do a slimline version of a console. No-one has ever suggested that MS do a slimline.
Though given that they have only just got the design and reliability right now after 3 years, a re-design probably isn’t a wise thing to do…
December 25th, 2008
OK Mike. Xbox accumalated 5 billion in losses over 5 years which I think is the life span of the Xbox. In March 2008 Sony had lost 3.3 billion in over 1 year and that was a balloning figure. Sony was loosing big time on each console sold because because the price of manufacturing was greater then what it was being sold for especially in the face of it’s compititors. When PS3 came out it was selling for $800. That is crazy and they had to drop that price quick if they wanted to sell anything. That’s why components were taken out like BC. Just because the cost of manufacturing may have come down does not mean that they don’t have to make up for the loss that the PS3 has already created. Mike do you think that this accumulated loss just dissapears. That why they said earlier that “we have a business to run” in response to them not droping the price. A price cut won’t come till maybe next year 4th quater. Keeping the PS2 around helps to alleaveate that cost. That why Sony said the price cut won’t come by March either. Mike I hate to say I told you so. Have you even taken a business class?
December 25th, 2008
Arckain
installs no but that is a requirement on some Sony games. For game saves sure 20G is enough. Xbox only had 8G and I never filled it. The reason they uped the Gigs is because of content being offered. 20G is to small it has nothing to do with price. It’s the same reason 360 uped their memory too. Sure you can swap out the HD on the PS3 but only a small select few would do that.
December 25th, 2008
CAD, Sony didn’t lose 3.3 billion in one year, and it is no longer “ballooning”.
SCEI lost $2.16 billion in 2006/7, lost $1.16 billion in 2007/8, and are expected to break even in 2008/9.
So when they do break even, that $3.3 billion loss won’t increase.
Given that the cost of the PS3 is now factually cheaper to build, and cheaper still in 2009, SCEI can get more aggressive knowing that they won’t lose any more money.
I like how people accuse Sony of still selling the PS2 just because “it makes them money”.
Hahaha.
December 25th, 2008
CAD,
Sorry I didn’t know, that actually kind of sucks to not have the option to play off of the disc. Do they do that because BR reads slower than DVD?
arckain,
You can’t buy a 100mb hard drive, but you can buy a 256mb thumb drive for a buck or two, a 2gb thumb drive for $6, and an 8gb for $15. 8gb is more than enough for game saves.
Now that I checked, I see the 80GB and the 160GB are the only ones being produced now.
While the 32GB SD is going for about $100 now, the 16GB is going for $30, and 8Gb is about $15. The latter two options would be viable to reduce price, with the biggest difference in the first being weight, and the second being half the price of the HDD.
Remember, the 20GB version was good enough to sell for $500 at launch, so it might be enough for saves and installs, though you would have to uninstall to save space. Remember, this is the “starter” version we are talking about here.
I still have my 20GB 360, and it works fine for gaming off of the disc. I may upgrade when I get back. Any media you bought that you uninstall, you can always reinstall if you desire for free.
lock_down,
I would hope the PS3 would be reduced enough in cost by then to be a cheaper alternative to a next gen console.
That is a good idea, a slimline version of the 360 could only help sell even more than PS3.
Considering it was only the processor and a drive problem that was causing those problems, and they have been fixed for a while now, it would be relatively easy to do, and still cost a $100 less than PS3. Oh yeah, they could also put in a flying lens player, or start producing DVD18 discs.
December 25th, 2008
I wonder just how ‘slimline’ these consoles can really get. 45nm or not, there is still going to be a fair amount of heat to dissapate…
360 + Slimline = The return of the RRoD
Well, that should make cad mad
Merry xmas 
December 25th, 2008
well… the drop in manufacturing cost is good news for Sony… but you guys forget… VISA PLAYSTATION CARD!!! jeesus christ… its $150 off… already one guy in the Podcastle got his Visa Playstation card…
I dont want anything else taken out of the PS3… Im already pissed mine has no B/C… no media card readers… NO MORE CUTS!!!
All ps3 games NEEDS installs… which means you need a decent sized HDD… so far… only Killzone 2 has been announced to have NO installs… no option to install… no install needed… so further down the lifecycle… probably more games will need no installs… but bny that time… Im hoping they will increase the HDD size…
Im hoping that the slim line PS3 has all the stuff in it… with a decent sized HDD… I need more than 80GB
…. Id buy that in a heartbeat…
also CAD… I know you dont HAVE to install games on the 360… but so far… the biggest cheer Ive heard for NXE… is the option the install… they are rejoicing in the fact that the 360 no longer sounds like a lawnmower…
but what do I know… Im not kev…
December 25th, 2008
“…only the processor and a drive problem…”
Yeah, that makes it alright then
December 25th, 2008
Valkria Chonicles doesn’t need an install afaik. but has the option to do so.
I would suspect there are more games out there that do not, so ‘all’ is not true…
I’d also like to point out, that the ps3 can also sound like a lawnmower. I was just playing some LotR demo and crash commando, and the thing sounds like a jet.
December 25th, 2008
SW,
Agreed, 360 is doing fine now in sales performance and does not need the redesign as badly as the PS3. As they have already solved the RROD with Jasper, they may have the option with Valhalla. By then though they will probably be focused on the next gen, instead of a redesign.
dwh,
I understand some people are having problems running the gauntlet to actually get that mystical unicorn of a discounted PS3 with their strings attached visa card.
I still do not understand why people find it necessary to keep all of their installs. Of course both will continue to increase the HDD, as this will help tempt more digital sales. Really though, it’s just logical as capacity increases. But if you need more than 80gb, why don’t you just get a 1TB and hook it up?
The biggest cheer was the option to install, and it does reduce noise. I don’t recall my 360 every sounding like a lawnmower though. That might be a slight exaggeration.
lock_down,
No, it does not make it alright, which is why they paid dearly for it, and fixed it.
December 25th, 2008
Will be interesting to see what happens with next gen designs.
I still don’t think MicroSD stuff will happen though…
And MS are gunna have to do drastic price cuts on their hard drives, and make bigger ones, if they want a fully digital download one, which I still think is even more unlikely.
But then ain’t that the point of consoles, that you don’t have to piss around with installs…..?
December 25th, 2008
lock_down,
Safe bet MicroSD will not be popular, it would be way too easy to lose. Maybe some kind of larger form factor though.
The good thing is Microsoft seems to have the redownload part down pat, which gives me more peace of mind and saves me money, because in a way, they act as the main storage facility, like Amazon with stuff I buy off of them digitally.
The hard drive price is really one of the things that irritates me though, especially since you can’t install a commercial one like you can with PS3.
Tech could well see the download time on installs reduced even more than what they are currently.
December 25th, 2008
carl I heard that the PS3 can only read up to 500 gb… will get that as soon as I have the other consoles…
first the 3 consoles… then 1 tb hdd… then THE WORLD!!!!
muahahahahahahahhahaah
I want to finish Assassins as soon as possible so I can delete that game data… but cant decide between that and Fifa and MGS 4….
so many decisions…
December 25th, 2008
hmm… maybe a tb hard drive partitioned into two 500gb would work? Or could it be something that a firmware update could fix?
That has got to be the best feature not found on the 360 by far (without cracking your console).
I see you can get 500gb now for about $50. $10 per 100GB, probably $10 per terabyte by the next gen, good stuff.
December 26th, 2008
I think a TB is a tad excessive for the ps3
Most games i’ve played have a 4 gig install, 200 games with 200gig to spare…
December 26th, 2008
So, if we’re not sure on MicroSD; and 100% digital distribution is still a bit off, doesn’t that mean optical discs will be still be used next gen?
Given how Pioneer is almost adamant that it is going to be producing 400GB-1TB discs in 2012; optical still seems the best bet for next gen.
If I had a fast internet connection, no monthly cap and just even had a stable net connection, I would love full digital downloads of games etc. But ISP problems like this are a ubiquitous problem for many; getting a disc is still the obvious solution.
That’s why I think MS has most difficult decision next gen. They clearly aren’t going to use Blu-Ray, but DD only is a huge gamble, as too is MicroSD.
They can’t use DVD9 again though.
Can they….?
December 26th, 2008
DVD18′s are another option:
http://www.afterdawn.com/glossary/terms/dvd-18.cfm
or flying lens:
http://www.maximumpc.com/article/news/new_flying_lens_could_revolutionize_optical_drives_render_bluray_obsolete
both represent a minimal investment/loss compared to blu-ray.
December 27th, 2008
“…three to five years we could see industrial implementation of this technology.”
I don’t think the 360 can hold out another 5 years while it waits for the next Xbox to have flying discs.
DVD18? Come on, MS would really be scraping the barrel then…
December 27th, 2008
Heaven forbid anything should compete with thy Holy BluRay of CGI holding death. Just kidding.
You are right though, 5 years is a stretch, and Microsoft will not ignore alternate tech that could compete with Sony and just fold. These are just two possible examples.
The capacity of DVD is still more than enough for most all games today and twice as much will probably be more than enough for next gen, especially considering that compression technology is advancing as well.
Granted though, a disc capacity “10 to 20 times higher than current Blu-ray technology” will be at reach much sooner than we may think, especially for a driven company with the resources of Microsoft (every year in the tech world makes something obsolete), so DVD18 would be scraping the barrel.
At the very least, MS will have no problem doubling the capacity of Blu-Ray, and it probably will still wind up costing less.
Microsoft can afford the investment, much more than Sony could have when they started with Blu-Ray, and from all initial signs, a tech like flying lens would cost much less to implement and manufacture. Considering the exponential rate of tech advancement, 2 years is more than enough time to make a competitive format and put it into the next gen.
December 29th, 2008
dirk – you do realize this “analysis” was from Isupply and not from sony right?
their costs are estimates and NOT something to be used as a fact as these can directly impact earning estimates, which sony clearly is NOT predicting the ps3 to be profitable in the foreseeable future.
it’s funny the ONLY ones claming profits are the ps3 fanboys and not sony, who desperately needs the positive press.
keep the promises coming fanboys..wake me up when one actually comes true.
December 29th, 2008
funny you guys turn a “may” into a ‘will’ as far as profits are concerned.
lockdown and dirk – come back at the end of Q1 for your ownage. the sony numbers are not looking good.
January 2nd, 2009
I suspect “imminent” is a headline attention grabbing stretch.
Besides, comparing the iSupply “cost” to the retail price is ridiculous. Sony doesn’t sell them to you, the retailer does. And I am sure they do so at a profit sony is still at LEAST $100 per console in the hole even at iSupply’s downward revised “cost”. Plus that cost doesn’t account for all the overhead of the games division like salary, benefits, marketing, facilities, etc.
January 6th, 2009
Yes, such a “stretch”, because Sony is doing so well right now with their present price, and can only do better this year now that things are looking so much brighter in the economy. Yes, “ridiculous”, iSupply obviously has no idea of what they are doing and have never done it before. I think there is a thing called MSRP that Sony actually sets, DavidB; and consoles are not supposed to be the money maker, it is software sales that is supposed to help pay and justify those other things you mention.