PlayStation 4 Costs Sony $381 To Build

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PlayStation 4 Costs Sony $381 To Build

A teardown reveals Sony's PlayStation 4 costs $18 less than retail price.

Pricing a console means balancing profit for the company and how much consumers are willing to spend. It's no surprise that giants like Sony look to make a profit on games and controllers as opposed to the sale of the console itself. Sony will make $18 with the sale of each PS4 system, an analysis research firm IHS revealed. With a $399 retail price, the cost of the parts of the PS4 and the cost of the labor required to assemble those parts totals $381.

It's still an improvement over the cost to build the PS3. Sony sold the PS3 at launch for $599, but it cost about $805 to build. Even later on when the system sold for $299, it cost $336 to build.

IHS noted how much each part cost in one system. The Advanced Micro Devices microprocesser costs $100 to build, and the 16 individual memory chips add up to be $88. IHS noted that the microprocesser chip is about three times as big as the next-biggest chip the firm had seen, and chips with a larger surface area have a higher probability of manufacturing defects. IHS estimates about one-third of the chips are defective and aren't used, which increases the cost. The other parts in the PS4 are much cheaper. The Seagate hard drive is $37, and wireless chips from Marvell and Skyworks plus an optical drive cost $28.

The DualShock 4 is an area where Sony can make a bit more of a profit. The controller costs $18 to build, and its retail price is $60. The controller contains Qualcomm Bluetooth chips, a Wolfson Microelectronics audio chip, and a Bosch motion sensor chip.

Sony's business practice in this regard hasn't changed much, but the cost to make a PS4 at launch is greatly less than the at-launch price to build the PS3. Even so, Sony will be looking to push games sales to make a profit.

Source: AllThingsD

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ah, so when they lower the price for the first time, they will no longer be making any money.

going on how out dated the hardware already is in this "next gen" of consoles, i'd have been more surprised had they been selling the damn things at a loss this time round.

Yeah, I don't believe it. They're paying small salaries to the factory workers, surely they're making about 299 dollars profit per console. Those executives they've got need huge loads of money to keep their life styles going.

Not really a big surprise. Consoles themselves aren't usually very profitable, and sometimes are sold at a loss. They're a long-term investment to get future revenue from the games.

So, let's do some maths, shall we people?

A million units sold in North America at an $18 profit in 24 hours - $18 million.

Sony's projected 3 million unit sales worldwide before the end of 2013 - $54 million.

A decision to make some worthwhile games readily available at launch? - Priceless.

Granted, I got Killzone: Shadow Fall because me and my brother like some Killzone, but I'm basically waiting until my birthday until the releases of inFamous: Second Son and Final Fantasy 14: A Realm Reborn for PS4.

CrazyCapnMorgan:
So, let's do some maths, shall we people?

A million units sold in North America at an $18 profit in 24 hours - $18 million.

Sony's projected 3 million unit sales worldwide before the end of 2013 - $54 million.

A decision to make some worthwhile games readily available at launch? - Priceless.

Granted, I got Killzone: Shadow Fall because me and my brother like some Killzone, but I'm basically waiting until my birthday until the releases of inFamous: Second Son and Final Fantasy 14: A Realm Reborn for PS4.

Actually it's pretty far in the red. First you need to take out the retailer cut. Then you must assign indirect and fixed costs to the unit.

silverbullet1989:
going on how out dated the hardware already is in this "next gen" of consoles, i'd have been more surprised had they been selling the damn things at a loss this time round.

People keep saying that but it isn't true. There's more to the console hardware than which series of GPU it uses. It isn't outdated. The way the unified memory architecture within the PS4 works is quite novel and won't be available to PC gamers until 2014.

XMark:
Not really a big surprise. Consoles themselves aren't usually very profitable, and sometimes are sold at a loss. They're a long-term investment to get future revenue from the games.

Which make me wonder why don't they just embrace the PC. They don't have to do anything except make video games for it. And maybe they will do that after this generation of consoles is over. Maybe the Steam Machine and Steam OS will have something to do with it. It makes the uncertain future certainly interesting.

MCerberus:

CrazyCapnMorgan:
So, let's do some maths, shall we people?

A million units sold in North America at an $18 profit in 24 hours - $18 million.

Sony's projected 3 million unit sales worldwide before the end of 2013 - $54 million.

A decision to make some worthwhile games readily available at launch? - Priceless.

Granted, I got Killzone: Shadow Fall because me and my brother like some Killzone, but I'm basically waiting until my birthday until the releases of inFamous: Second Son and Final Fantasy 14: A Realm Reborn for PS4.

Actually it's pretty far in the red. First you need to take out the retailer cut. Then you must assign indirect and fixed costs to the unit.

The joke was made to imply that making good games for the console would've helped in the very situation you just described. Thank you, though, for that additional input.

roseofbattle:
Sony will make $18 with the sale of each PS4 system, an analysis research firm IHS revealed.

No they won't. There's labor costs for assembly, factories and storage, the retailer's cut... They're not even breaking even per unit sold. It's worse if you start to figure in advertising and R&D costs that they pour into the PS4.

Still, the amount they're losing per system sold is low enough they can make it back fairly quickly. A game and a PS+ subscription on average per unit should be more than enough to make up the difference.

P.S. Thanks

Wait a minute, this article doesn't make sense. It assumes that retail price - manufacturing costs = profit for Sony. That would be true... if the stores selling the PS4 didn't take a cut of the profit, which is about as likely as pigs flying. Factor in the cost of shipping and advertising too, and it's more likely that the profit for Sony is minimal at best, if not negative. Of course, the extras and game sales are where the real cash is.

Edit: Rats, ninja'd by Covarr whilst I was writing this!

CrazyCapnMorgan:

MCerberus:

CrazyCapnMorgan:
So, let's do some maths, shall we people?

A million units sold in North America at an $18 profit in 24 hours - $18 million.

Sony's projected 3 million unit sales worldwide before the end of 2013 - $54 million.

A decision to make some worthwhile games readily available at launch? - Priceless.

Granted, I got Killzone: Shadow Fall because me and my brother like some Killzone, but I'm basically waiting until my birthday until the releases of inFamous: Second Son and Final Fantasy 14: A Realm Reborn for PS4.

Actually it's pretty far in the red. First you need to take out the retailer cut. Then you must assign indirect and fixed costs to the unit.

The joke was made to imply that making good games for the console would've helped in the very situation you just described. Thank you, though, for that additional input.

Adam Jensen:

silverbullet1989:
going on how out dated the hardware already is in this "next gen" of consoles, i'd have been more surprised had they been selling the damn things at a loss this time round.

People keep saying that but it isn't true. There's more to the console hardware than which series of GPU it uses. It isn't outdated. The way the unified memory architecture within the PS4 works is quite novel and won't be available to PC gamers until 2014.

It maybe clever the way they do things, but when they cant even run games at 1080 in 2013 then what in the hell was the point in releasing a new gen of consoles to last another 7-10 years?

Now I'm waiting for the xbox one cost to build. with a little less performance hardware than the PS4, but inclusion of the kinect I wonder how justifiable their price will be.

Adam Jensen:

silverbullet1989:
going on how out dated the hardware already is in this "next gen" of consoles, i'd have been more surprised had they been selling the damn things at a loss this time round.

People keep saying that but it isn't true. There's more to the console hardware than which series of GPU it uses. It isn't outdated. The way the unified memory architecture within the PS4 works is quite novel and won't be available to PC gamers until 2014.

Exactly. The Jaguar APUs aren't outdated, they're AMD's current low-power laptop APU. They are comparatively underpowered but maybe metaphorically taping two of them together will help. The next-gen consoles should see a minor jump in performance if devs learn to effectively code for that many cores (most devs are shit at that sort of thing at the moment).

Adam Jensen:

People keep saying that but it isn't true. There's more to the console hardware than which series of GPU it uses. It isn't outdated. The way the unified memory architecture within the PS4 works is quite novel and won't be available to PC gamers until 2014.

I don't think desktops will ever use hUMA. Maybe laptops, but not desktops. It kinda kills the ability to choose your processor and isn't really an advancement for anything but mobile devices or devices that you can't change the hardware.

CrazyCapnMorgan:
So, let's do some maths, shall we people?

A million units sold in North America at an $18 profit in 24 hours - $18 million.

Sony's projected 3 million unit sales worldwide before the end of 2013 - $54 million.

A decision to make some worthwhile games readily available at launch? - Priceless.

Granted, I got Killzone: Shadow Fall because me and my brother like some Killzone, but I'm basically waiting until my birthday until the releases of inFamous: Second Son and Final Fantasy 14: A Realm Reborn for PS4.

I'd advise checking out the indie titles before that. There's some amazing stuff coming from independent artists lined up for the machine before the end of the year.

silverbullet1989:

CrazyCapnMorgan:

MCerberus:

Actually it's pretty far in the red. First you need to take out the retailer cut. Then you must assign indirect and fixed costs to the unit.

The joke was made to imply that making good games for the console would've helped in the very situation you just described. Thank you, though, for that additional input.

Adam Jensen:

silverbullet1989:
going on how out dated the hardware already is in this "next gen" of consoles, i'd have been more surprised had they been selling the damn things at a loss this time round.

People keep saying that but it isn't true. There's more to the console hardware than which series of GPU it uses. It isn't outdated. The way the unified memory architecture within the PS4 works is quite novel and won't be available to PC gamers until 2014.

It maybe clever the way they do things, but when they cant even run games at 1080 in 2013 then what in the hell was the point in releasing a new gen of consoles to last another 7-10 years?

....who told you they can't run games at 1080p? Thats the Xbox ONE - the Ps4 is the one that can do native 1080p for COD: Ghosts, a game whose developers do not give even the slightest shit about optimization.

silverbullet1989:
When they cant even run games at 1080 in 2013 then what in the hell was the point in releasing a new gen of consoles to last another 7-10 years?

I assume it was also people like you saying that "current gen consoles are holding back gaming 'cos they are running on 8 year old hardware" ... they simply can't win.

Yeah they could start releasing top of the line gaming pc's packaged as consoles but people started shouting at Sony at the cost of the PS3.

Simple fact is most people wont even notice the difference between the resolutions, even in a side by side, which most people will never do in there homes.

The DualShock 4 is an area where Sony can make a bit more of a profit. The controller costs $18 to build, and its retail price is $60.
Read more at http://www.escapistmagazine.com/news/view/129793-PlayStation-4-Costs-Sony-381-To-Build#YRZpkO1Z44i40EhE.99

You know, I almost bought a second PS4 controller today. Glad I didn't. That's highway robbery right there. I'll wait for a sale.

You could at last go to $50 or even $45, Sony. That's still plenty of profit without screwing your customers over.

Sony is losing money on these, probably. I say probably because of a few factors. First, no console is worth a profit margin of less than ten dollars. Second, labor is still a cost. Of course, Sony is buying these chips in bulk, and isn't paying full retail for any part at all. It might actually be close to profit neutral for Sony.

XMark:
Not really a big surprise. Consoles themselves aren't usually very profitable, and sometimes are sold at a loss. They're a long-term investment to get future revenue from the games.

Yep completely true. Which sadly I feel is one of the reasons AAA game spending and DLC double dipping has become so insanely out of control. It also goes a long way in explaining why there have been so many AAA multimillion dollar selling "failures" these last few years. With the release of the PS4 and the Xbone, and in the wake of companies trying to chase GTA V money without understanding just why that game made so many sales, I feel it's safe to say we can all expect our games to get a bit worse this generation, as these not very profitable selling console companies manipulate AAA studios to try to increase their profit margins.

Covarr:

roseofbattle:
Sony will make $18 with the sale of each PS4 system, an analysis research firm IHS revealed.

No they won't. There's labor costs for assembly, factories and storage, the retailer's cut... They're not even breaking even per unit sold.

Labour is accounted for in the numbers. Also, storage isn't that expensive considering most of the consoles are sitting in factories owns by the retailers that sell them. i.e. Wal-Mart, Target. That and the manufacturers don't charge Sony for keeping the PS4's there. Meaning Sony's not paying anyone for storage. I also think it'd make sense for Sony to have a corporate shipping contract with a company for all Sony Products so I think that's also a non issue. And the retailer's cut is tiny. $18 profit per unit sold is a believable number. The analysts did their job on this one.

vxicepickxv:
Sony is losing money on these, probably. I say probably because of a few factors. First, no console is worth a profit margin of less than ten dollars. Second, labor is still a cost. Of course, Sony is buying these chips in bulk, and isn't paying full retail for any part at all. It might actually be close to profit neutral for Sony.

Firstly, consoles are usually sold at a loss. Manufacturers make money mostly in software sales. The PS4 coming in at $18 profit is actually really good all things considered.

Secondly, labour is accounted for in the $381. Says so in the article:

roseofbattle:
With a $399 retail price, the cost of the parts of the PS4 and the cost of the labor required to assemble those parts totals $381.

So yeah. Sony's making money right off the bat this time.

silverbullet1989:

CrazyCapnMorgan:

MCerberus:

Actually it's pretty far in the red. First you need to take out the retailer cut. Then you must assign indirect and fixed costs to the unit.

The joke was made to imply that making good games for the console would've helped in the very situation you just described. Thank you, though, for that additional input.

Adam Jensen:

silverbullet1989:
going on how out dated the hardware already is in this "next gen" of consoles, i'd have been more surprised had they been selling the damn things at a loss this time round.

People keep saying that but it isn't true. There's more to the console hardware than which series of GPU it uses. It isn't outdated. The way the unified memory architecture within the PS4 works is quite novel and won't be available to PC gamers until 2014.

It maybe clever the way they do things, but when they cant even run games at 1080 in 2013 then what in the hell was the point in releasing a new gen of consoles to last another 7-10 years?

The PS4 does do 1080p, it's the xbox one that can't, being stuck with 720p. Also remember it's still an improvement over the PS3, sure it's not a top of the line PC but consoles have never been PC level of power.

RicoADF:
The PS4 does do 1080p, it's the xbox one that can't, being stuck with 720p.

Even that's not entirely accurate. The Xbox One can do 1080p, it's just Call of Duty: Ghosts (and possibly some other games) that couldn't. That's more on Activision than on Microsoft. You can bet that if Rayman Legends gets ported to Xb1, it'll run at 1080p.

P.S. Thanks

MCerberus:

Actually it's pretty far in the red. First you need to take out the retailer cut. Then you must assign indirect and fixed costs to the unit.

The source article actually talks about that but they failed to mention it in the news article.
[quote]With the component cost and the retail price so close, it's possible, Rassweiler said, that Sony is taking a very small gross margin or even a possible loss on the console in hopes of making it back on games. "If your cost is within $10 to $20 of the retail prices, there's very little chance you're making a profit on the console," he said. /quote]

They also failed to take into account that Sony is not paying retail price for those components and they did not include things like the cost to build the case, lights, wires, etc as well as storage and shipping costs.

Adam Jensen:

silverbullet1989:
going on how out dated the hardware already is in this "next gen" of consoles, i'd have been more surprised had they been selling the damn things at a loss this time round.

People keep saying that but it isn't true. There's more to the console hardware than which series of GPU it uses. It isn't outdated. The way the unified memory architecture within the PS4 works is quite novel and won't be available to PC gamers until 2014.

Unified memory architectures are nothing new, the Xbox 360 had a unified memory architecture too. Its not some great feature, its a cost cutting strategy that hurts the machines performance. Different tasks are handled better by different types of memory, the PS4 (and the 360 before it) uses memory tuned specifically for graphics performance, basically it has extremely fast speed at the cost of huge latency. while great for graphic operations it sucks for anything else. This is why PC have two types of memory, GDDR memory on the GPU and DDR for everything else.

basically unified memory hurts performance in non graphical operations. it is a sensible cost cutting measure in a machine primarily used for playing games, but not something to be trumpeted as an achievement

JoJo:
Wait a minute, this article doesn't make sense. It assumes that retail price - manufacturing costs = profit for Sony. That would be true... if the stores selling the PS4 didn't take a cut of the profit, which is about as likely as pigs flying. Factor in the cost of shipping and advertising too, and it's more likely that the profit for Sony is minimal at best, if not negative. Of course, the extras and game sales are where the real cash is.

Edit: Rats, ninja'd by Covarr whilst I was writing this!

Actually, I talked to some stores just before launch (not intentionally, it just happened) and they said they'll be making a good $10 profit on each PS4 sold.

---

Back to the article... it seems lacking. The numbers aren't really there. That $381 is for parts and assembly only. But, it's still not too far off. And I have to say... HA! You guys are getting what you paid for. Console buyers constantly demand cheap hardware so now this stuff is being built with older tech to keep the costs down.

Okay okay, I don't actually see anything wrong with this. Consoles are dedicated computers (I guess not so much anymore) and is way more efficient with it's resources than a PC (or Mac) so it doesn't need the same kind of specs a gaming PC does. Console buyers should be okay with lesser stats because they get a good run from the hardware.

Except for the video card, obviously. Wait... HA! You get what paid for.

RicoADF:
The PS4 does do 1080p, it's the xbox one that can't, being stuck with 720p. Also remember it's still an improvement over the PS3, sure it's not a top of the line PC but consoles have never been PC level of power.

The Wii U can do 1080p, in fact the Wii U probably has more games in native 1080p than either of them. The shiny games like Battlefield 4? Neither the Xbone or the PS4 can manage native 1080p for games like that.

It'll be $100 profit after one year. I'm surprised they got it that low for initial production. And since they have such solid demand, the PS4 will be printing money for Sony.

So?

I'd worked a game store for years, back when the SNES was king and the PS1 had just been born, and we (along with everyone else) pretty much sold sytems at cost - the games and used sales were where the money was.

This isn't news to me, it's pointing out the obvious.

Interesting. I was wondering how Sony was doing on profits per console. And it seems that they aren't entirely boned. With the way they have apparently been selling (like hotcakes), it seems Sony will be enjoying a green Christmas. If not immediately based on the console, it doesn't seem like they have to make up for much of a loss.

I've been really impressed with Sony so far. It seems that they learned the lessons of the PS3. Keep pricing down. Don't sell at too much of a loss. Don't let the major competitor get a extended jump start. Don't assume people have to have a new system or expect sales like the PS2.

Maybe I'm just imagining that, but it seems that they are actively avoiding those same pitfalls.

roseofbattle:

The Advanced Micro Devices microprocessor costs $100 to build, and the 16 individual memory chips add up to be $88. IHS noted that the microprocessor chip is about three times as big as the next-biggest chip the firm had seen

You're welcome.

Also, great news! Sony is making a profit on consoles. Awesome.

Do we have any idea what the retailer margin is for the system?

I remember when the PS3 cost more to make than it sold for. I used it as another reason why the Xbox was better.

Now, all I can say is that I wish they were selling the PS4 for hundreds of dollars less than it costs to make, because then I could probably afford to buy one right about now.

If what Sony says on taking loss for PS4 is true, they should really talk to those "analysts". Maybe they can figure something out to make it more profitable

At least they are not selling it at a loss and making up the loss by selling them in volume.

I would be focusing more on insisting on LAN games rather than making everything PSN centralized.

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