http://www.tech.co.uk/home-entertainment/gaming/games-consoles/news/how-long-before-ps3-xbox-360-cost-199?articleid=1225630683

James Rivington

30 nov. 2007 14:58 GMT

The head honcho of a major games publisher says that the prices of the Xbox 360 and PlayStation 3 must fall to $199 (£96.50) before the consoles will have mass market appeal. Recent sales figures might disagree slightly with that, but there's no denying that cheaper hardware would increase sales even more dramatically.

"The Wii at its price point is now setting a standard and an expectation and people say, well, the Wii is less complex technically. I don't think that really matters as much to the consumer," Activision executive Bobby Kotick told the Reuters Media Summit. "In the next 24 months they will all need to be at that $199 price point, and you can imagine Nintendo will be down to the $129 [£62.50] price point over the next few years," he said.

The $199 console goal

So how long before Microsoft and Sony can start churning out consoles at vastly reduced prices? Well one thing's for sure, Microsoft is a lot closer to hitting that price point than Sony is right now.

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The cheapest Xbox 360 model, the Arcade, can be bought for around £189 in the UK, while the 40GB PS3 costs £279. There are some fundamental reasons why this is, the main one being that the PS3 is certainly a far more complete console than the Xbox 360 Arcade.

For a start, it's got an internal hard disc and a Blu-ray optical drive, neither of which can be found in the Xbox but both of which combine to keep PS3 production prices high. When the PS3 first launched last year, those two components alone made up over 20 per cent of the £420 it cost Sony to produce each console.

PS3 component prices

It paid Seagate $54 (£27) for each 60GB hard drive and Sony manufactured its own Blu-ray drives at a cost of $125 (£63) a pop. At that time, the manufacturing costs for the 60GB PS3 model amounted to $840 (£420) while the retail price in the US was $600 (£300), meaning Sony took a $240 (£120) hit for every console sold.

In comparison, iSuppli said that before marketing and advertising, Microsoft pretty much broke even on its hardware sales, leaving it free to make a big profit on software and the Xbox Live service.

Since then, Sony has reduced the cost of the hard drives used by reducing capacity in most cases to 40GB. And as the market advances, Blu-ray drives are also coming down in price quickly. When the PS3 launched, the cheapest standalone BD player cost around £1,000. Today, the Sony BDP-S300 costs £279 on Amazon UK.

45nm Cell processor

Another major component inside the PS3 is the Cell processor, manufactured by IBM. The current PS3s use 90nm Cell processing cores, just like the Xbox. These are expensive to manufacture and inefficient to run. So it's an absolute given that 65nm and 45nm Cell processors are on Sony's PS3 roadmap. This new hardware would bring Sony's costs down substantially, which in turn would lead to cheaper retail prices.

The same is true of the Xbox 360. At some point in 2008, certainly by this time next year, Microsoft will ship all its consoles with 65nm cores which will make its own production costs cheaper because you can get more cores from a single layer of silicon.

At launch, the total cost of motherboard components for the PS3 was $500 (£250) and that included the graphics chip as well as the Bluetooth module and USB support. This will inevitably reduce over time. And as production costs get cheaper, so will retail prices. More consoles sold means more games sold. That means more profit for Sony and Microsoft which means they can subsidise hardware even more. Sales go up again and the cycle continues.

Whatever happens in the next 12 months, it wouldn't be much of a surprise if Christmas 2008 saw PS3 consoles on sale for $199/£199.

tech.co.uk

 ==> so at Xmas 2008, the PS3 price will be 199$ ?

(then the Xboxarcade will be 50$ and the Wii wil be free lol ?)

do you believe this ?

No I don't. They haven't considered current and future sales and manufacturing costs enough.

My opinion:

Wii: Selling out permenantly now + SSBB/MKWii/Wii Fit in H1 2008 + unknown-as-yet 2008 games = No price cut.

Xbox 360: Will have a Arcade $250 / Premium $300 / Elite $350 by Christmas 2008

PS3: Will have a 40GB $350 / 80GB $450 by Christmas 2008.

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Oh, and AAAAHHHH BRITISH DISCRIMINATION!!!!!!! (£199 = $400+) They could sell the 40GB PS3 or Xbox 360 Elite for £199 NOW and lose no more money than in North America.

Neither the 360 or PS3 will have their best SKUs down that far within 2 years imo. But if one of them can it will likely be the 360.

Their sales will definitely boost when they get price cuts, but like every other "cut" so far it only proves to be temporary so I don't know how enthusiastic Sony can really be about dropping price again any time soon. The 360 at least has some room to play with and still be profitable so they are a helluva lot more likely.

As for the Wii. I think there is a chance even it could be $250 still next x-mas, but I do think it will be at least at or below $200 by X-mas '09.

Only if they want to continually lose money. At some point they will actually want to profit on the PS3, and I'm sure they have a point where they will be happy enough with their stake in the market share, their share of attention from developers, and general place in the war to stop taking losses on their system and start profiting from it. What good is having the majority of the market share if at the end of the gen your bottom line is tens of billions in the red?

At some point they are going to say "good enough" and start making money, so I think that it will be a good while before they get to 300 and maybe at the end of the gen when the new systems are coming out it will get down to 200.

Well if it's true that SONY dropped out of the Cell-delopment team, that would mean that they lost their piece of the profits right? Does anyone think its possible that maybe IBM and Toshiba might have offered cheaper components to get them out of the pie?

I'm sure there is some kind of deal for pricing. But if the cell sells well outside of the PS3, Sony won't get any of those profits.

hahaha....i dont...its look like James Rivington is a sony fanboy....

 Very true, but Maybe sony was thinking Blu-ray and PS3 software would be more than whatever their share of the chipset would be. Seems unlikely but hey it's SONY >_> when does any of there stuff make sense in the beginning?

Sorry, its just not feasible.

by next xmas i see Wii @$225, 360@$225,$285,$345 and PS3@$350/450.

I could be wrong, but that is my estimate. The only reason I see the Wii reducing price is due to 360. When MS reduces their prices again Nintendo and Sony will follow suit to try to keep the above pricing where Wii is at most equal to 360 lowest sku and PS3's lowest sku is no more than $50 more than the Elite.

I would hope to see prices lower than that for the 360 ($115 off after 3 years is rather pathetic), but you're probably close to the mark there, except I think the Wii will drop to $200 flat. $25 off is a slap in the face. Sony won't have much wiggle room in 2008 if they hope to even come within $1b of breaking even this generation. They dropped prices too far and too fast in 07 to give much of a break in 08.