If you listened to Sony's last conference call, they said they were hoping to break even on hardware sometime in 2008. Which means if there are more price cuts, it could very well not happen.

Yep, a console sold at a loss is only profitable if

LTD average loss per console sold < LTD attach rate * LTD average revenue per game sale

Their current attach rate is probably somewhere in the 3s. The only way to increase attach rate is to expand their software sales at a faster rate than they expand their user base. But that will only happen if they get a bunch of titles with long legs and it doesn't look like it will happen soon.

For third party titles, my understanding is that they make about $10 per sale. They make more money on titles they publish of course, but that's offset by the development costs. Barring a lot of really huge first party titles that earn a lot more money than they cost to make, I don't see this variable changing much.

The only real variable in the inequality is average loss per console. This will only go down if they sell more consoles at a smaller loss or at a profit. The more consoles they sell at a higher loss, the bigger the hole they dig for themselves. They keep selling them at a huge loss anyway though because they need to get all of the marketshare they can since marketshare begets developer support and public interest which begets further sales at a later time. 

Where in the world do you get this "likely price cut in March" nonsense? Speculation passed off as probable fact is no substitute for reality. You (and I) have no idea what the hell is going to happen. Also, this $100 figure? Out of your ass too? I thought so. Show your work before we post, eh?

Edit: After I posted this, I re-read it and found it a little harsh. I don't apologize. I'm just tired of all of this 'pulling stuff out of thin air' jazz. This isn't a predictions thread. 

Let me point out, I like that they're selling PS3's because more PS3's sold = more support = more games for me!

Having said that let me say this, PS3 came out at 599.99 and 499.99USD a 20GB model and a 60 GB model. The 20 GB was promptly discontinued in America the 60GB was discontinued(the 20GB in Japan with it probably unless it had been discontinued already they never really announced this...) 80GB announced and 60GB dropped to 499.99 so now 80GB w game at 600$ 60 gb no game at 500$ It comes out to be a clearance sale on the 60GB when they're gone they're gone. 40 GB rumors at 400$ surface. 40GB released at 400$ 60GB gone 20GB gon 80GB w game = 500$

So we gained 20GB lost 100$ overall on prices. The models out there are two completly new ones from the launch models. It creates a feeling of uneasiness in the market. The problem with price drops is too many too fast, too many model changes create uncertinty in the uneducated masses. If they drop it to 350$ so soon after having released it at 400$ it may theoretically create suspiscion in the market. Some people may think "Well whats wrong with them?" "Did they drop the price to get rid of them for a new model, I'm waiting for that!" or various other thoughts could come into mind. You have to admit 500$entry price to 350$ entry price in 1 1/4 year? If I wasn't educated on the market I'd be curious as to why this happened. The core market will eat it up but beyond that they'll tilt their heads and ask why it could end up hurting more then helping to lower prices so fast.

I would actually put the average console cost of production around $900 U.S. We have a general estimate for parts around $800 U.S. Further more its quite generous to consider the additional expenses as being a mere $100 U.S. I can hear the fanatics out their with their hearts all a flutter. Calm down there is a rational explanation. Yes Sony has actually increased their losses.

Sony produced 5.5 million consoles by the end of April. You could consider this the initial production run. Seriously with the manufacturing woes up until that point. There was not the room for price cutting. Quite contrary to that the delays and difficulties increased costs as additional measures had to be taken. You have to remember Sony fell half a million units short of its goal by that point.

With the later price reductions Sony was forced to increase the losses on these initial production models. Sony actually lost more money then they were initially losing, and it will be months before any production savings can be factored in. Most of the units sold up until this point are measured under the original loss. Whatever you thought was the logical loss at the beginning of this year the reality is its much the same now since most of the units sold are of that original production run.

Lets say for example that I buy a hundred oranges at a dollar a orange, and then sell those oranges at half a dollar a orange. You would say I am losing half a dollar on each sale. Then lets say I get a new supplier that sells me oranges at seventy cents a orange, but before I can do the math I have only sold eight of those new oranges. You might say if I am still selling the oranges at half a dollar then I am only losing twenty cents a orange. However the truth is that life is not like that I have to average out my losses. Even though I lose less with my newer oranges. I still lost much more on average. Especially since I had only sold eight oranges at the significant reduction in losses.

Most of the units Sony sold were built in the initial six months during the shakeout. Hardly the best time to cut production costs, or to see wholesale cost reductions. The result being that when Sony increased the losses on these machines they actually lost more then they were losing initially all the way up to this very day.

The result is that Sony has actually increased the losses on their units, and manufacturing stream lining will not help at all in the near term. They caused a spike in losses. Which will probably not be counterbalanced by reduced production costs for the next few months. No Sony is not losing less money they are losing much more. The losses have increased dramatically.

I would say we might be looking at somewhere between component costs, and initial production costs which would probably place the losses at $250 U.S. You have to factor in a average loss dependent on price per MSRP per region then reach a average. For instance in some regions the loss was less, and in others substantially more. However it cannot be below $200 U.S. This is not even factoring in the other accumulated losses incurred over the year due to poor performance.

Sony is losing profits from game development that it is giving freely away as promotional bonuses. Further more they have had to fund greater development, and offer financial incentives to third party developers. You cannot ignore these, but without the contracts, or the projections we have no numbers to work from. However a degree of profitability was sacrificed here as well.

Sony has not actually made any great stride towards cost reduction on average. Whatever you felt was the rational number at the time. The reality is its probably just getting back to it at this point.

@Dodece, those are your thoughts on the subject, but are you certain of any of it? I also find it nigh impossible for Sony to have cut production costs from a loss of almost 300$ at launch to profitability with the 40GB, but do you think that the gap is really over 200$? Abyway we still would need more viable data to even have an average chance to get something right on the subject.

 50-100$ per console is what I think too. No I won't calculate it for you, because you defenitly to crude. Leo-J may be a Sony fanboy, but he definitly doesn't deserve to be attacked in such a offending way. So google for your self, I didn't see you posting a number, and yes this is a prediction thread, or you can lead us to somebody who is actually know the true number! 

I believe the console is not so expensive.
I can't believe Sony is losing so much money on the 40gb.
Dont ask me why, I dont know why.

Remember people already didn't believe about a 200$ price cut/40gb model this year and Sony made them wrong...

Dodece, there was nothing rational in your long winded post.

The PS3 never cost $900 to manufacture at launch, and it definitely isn't even remotely close to that now.

My personal opinion is that the 40gb Sony is eating between 50-75 USD, and about 25-60 on the 80gb.

My information is as good as yours, pulled out of thin air... Wait, I take that back. There were detailed reports that hashed out the costs of the PS3 to make the 60gb US version and since that time there have been many components and parts that have dropped significantly in cost.

Whats up with all the Sony hate tonight? Did the PS3 RROD your Xbox? Did it pee in your cheerios?