| oni-link said:
I read an article somewhere about how much markup retailers make to offset the volatile price fluctuations of videogame hardware manufacturers. I'm too lazy to look them up so google it yourself. What I do know is (from my teenage years working at retail) electronics were subjected to at least 20-30% markup and toys around 100% markup. That's why you see places like Target and Sears sometimes selling videogames or electronics for 50-75% off original price!!! One just has to look at HDMI cables and such to see the vast diffrence in price between retailers and wholesalers. Moving on I found this last year as a prediction of the Vita's sales and loss per unit that shows no misinterpretation with the Reuters article. It says:
Sony's PlayStation Vita will sell in the neighborhood of 2.5 million units before March 2012, says Kazuharu Miura, analyst for Japan's SMBC Nikko Securities. However, this respectable projection – not as high as, say, the DS' 5.3 million launch year, but not bad for a machine that won't even hit Western territories until early next year – is tempered by Miura's estimation that Sony will lose around 5,000 Yen ($US65) per unit sold. A less optimistic prediction still comes from Heavy Iron Studios' Matthew Seymour, who openly calls the system a “car wreck.”
Miura says the Vita can expect to sell closer to 8.5 million units in financial year 2012, its first full year at retail – saying that if his projection of 28 million units of software are shifted for that year as well, Sony's losses on the machine will be halved. He says these figures are highly contingent on Sony's ability to provide players with compelling software, which Ace Security's Hideki Yasuda warns will be harder than on previous machines. Yasuda says the Vita's higher graphical demands and unproven user base make developing for the system a higher-stakes gamble in the early days.
Seymour – who, along with Lyle Hall, heads the ex-THQ subsidiary Heavy Iron – is more blunt: “With all due respects to Sony and Vita, it's a car wreck.” You probably hadn't heard of Heavy Iron, whose games include UFC Trainer and Spongebob Squarepants: Battle for Bikini Bottom, until the studio came out against the great hope of handheld gaming, but Hall and Seymour don't want to come across like they're dissing Sony just for the sake of it. Hall says the company would love to see the platform succeed – “The technology is sweet... but I just don't know there's a market out there anymore for the hardware” – but question the relevance of releasing game-only platforms in a decade increasingly dominated by the possibilities of mobile technology.
“If people aren't willing to pay $249 for a Nintendo 3DS, why would they pay $299 for Vita?” asks Hall. “People don't want to carry more than one thing in their pocket: that’s why Android and iPhone have done so well.” The comparison makes the 3DS' first holiday season – at the controversially reduced price – one to watch as a possible bellwether for Vita's performance, with Yasuda having recently voiced “major pressure” for Sony to match Nintendo's price cut with its own revised figures.
source: http://www.gamesradar.com/analyst-vita-will-sell-well-and-cost-sony-65-per-unit/
So no more spin please. The facts so far is that the PSV is a losing endeavor for Sony who expected to sell 2.5M PSV before March 2012 and so far has only sold >2M units by mid-early May. The system is selling at a loss with the best game U:GA barely selling 500K units since launch, so software has yet to make up for losses in hardware, marketing and research. The PS3 was sold for a loss for many years and Sony is just beginning to recoup those losses. It would be downright idiotic for them to sell another console and hope to make up their investment 2-3 years down the line; especially in their current financial state. If I was a Sony fan (I am not) I would like them to put the Vita to sleep early in the game before more losses accure. It only makes sense since the PS4 is just around the corner don't you think? 
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The underlined: You are probably thinking about software. Video game software has volatile prices while hardware tends to be steady. The suggested retail value of a console will change upon the burden of the manufacturer. If they want to drop the price, they either reduce the cost of manufacturing or they sell at a loss. Retailers tend to retain their markups, even more so today since markups are fairly low there wouldn't be room to shorthand retailers.
The bolded: that was an analyst who didn't have the data. He assumed manufacturing costs were much higher than the $160 that was announced much later than when he said that. It says they are estimations, and they are estimations that he would gladly take back today. This was a prediction and turned out inaccurate.
Electronics have terrible markups, around 8% for things like cell phones. Software gives around 10-20%, while accessories can be much higher30-100%. 15+ years was a long time ago to be basing your figures for this, everything has changed.
For an example, the Wii made retailers around $12.50 and that was a $299 system. That's 4%. It's hard to say whether the Vita is doing the same thing, because markup varies among products/companies, but if so than $12.50 and assuming the wholesaler has the same, a total of $25. Tag on $10 for packaging, another $20 for shipping. = $55 on top of the $160, so $215. Doesn't even break the $250 mark. Not that this is accurate exactly, but if the Wii sold for 4% retail markup, you can't use your 20-30% estimates.
Retailers sometimes sell things at cost or even at a loss to attract customers. For video games they can drop 20% to break even, but if they sell the occasional accessory with that purchase, they are still making money. It's their management that calls the shots on that stuff. For hardware though, retailers have incentive to sell it at low markup because they want to get it into consumers hands as much as the manufacturers do, because then they will have customers who will buy software and accessories that have higher markups. Repeat business is the foundation of sales, and its easier to sell cheaper products with higher markups than to try and maintain those markups on larger ticket items, especially ones required to make sales on the other products.
Sony is keeping quite on the Vita's per unit profitability because its a lose-lose PR situation. If they say they are making a profit, the public might feel slighted, like they are being taken advantage of, and more demand would be seen for Sony to drop the price quoting "because they can" as an excuse. If they announced they were selling it at a loss, then they would get even more heat from people looking for weakeness in their company.
Maybe I can go to Gamestop tomorrow and see if I can find out how much a Vita costs from the wholesaler.
