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Forums - Sony - PS3 profitability -- Breaking down Kaz' statement

Xxain on 25 August 2009

wat about the sell 13mill PS3 to be profitable thing??



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JEDE3 on 25 August 2009
NJ5 said:
JEDE3 said:

I don't know, I estimated ~280 not including all that stuff. (As you can see from my previous post) 311 isn't that far off but would they be able to sell enough hardware and periphs to make up for that? What would the dollar amount be for their loss for you. Including all that stuff. And I know you wont forget to take retail cut out of the 300.

Here is why I get $311:

When the PS3 launched, 1 dollar was about 117 yen. If iSuppli's estimate of $840 in production cost was correct back then, that was:

$840 * 117 = 98,280 yen

Reduce that by 70%, and you get 29,484 yen, which is about $311.

 


How much do you think they'd be losing with everthing factored in?

greenmedic88 on 25 August 2009
JEDE3 said:
greenmedic88 said:
NJ5 said:
greenmedic88 said:
Xxain said:
guys..do we know how much it cost to make a Slim and Phat yet at this moment???...

There is no definitive answer. Everything has been based upon estimates, with a common one using the often quoted $840 initial production cost of the 60GB unit as the starting point for the "near 70%" reduction in per unit production cost quoted recently by SCE, which would put the production cost at about $252.

Assuming it isn't, either that $840 initial estimate was too low, or the "near 70%" reduction could in fact be something closer to 65% or even 60% which would bring current production cost to $294-336.

As one can see, it really doesn't take much to shift that current production cost number.

 

I believe the 70% production cost reduction refers to the cost in Yen, in which case I calculated the production cost would be at least $311 now (which doesn't count the controllers, boxing, manuals, shipment and things like that).

 

The cost in Yen would explain it while keeping both the "near 70%" statement and an initial production cost of about $840.

No need to include cost of controllers, packaging, print materials, distro costs, retailer cut etc. since those aren't included in unit production costs. They do have to be included, on the other hand, once a hardware manufacturer starts to claim that they are making a profit on every unit sold.

Even if SCE was producing them for under $300, they'd still be losing money on every unit sold due to included accessories, packaging, distro costs, retailer cut, etc.


So you agree with me that even if they cost 280 to manufacture Sony would still not be profitable.

I'll say it would be false for SCE to openly state they were making a profit on every PS3 sold, even if the hardware production cost was $280, or even less.

What the current model has done, is greatly reduce the amount of money being lost on each hardware unit sold, meaning it's easier for the PS3 to make profit as a platform due to all the actual revenue/profit generating streams an established platform produces.



JEDE3 on 25 August 2009
Xxain said:
wat about the sell 13mill PS3 to be profitable thing??

are you talking about trenttons quote? It doesnt mean that if they sell 13 million systems this FY that the HW would magically become profitable. What he meant was that with a higher user base buying more SW and periphrials DLC and such it'll balance out the losses

NJ5 on 25 August 2009
JEDE3 said:
NJ5 said:
JEDE3 said:

I don't know, I estimated ~280 not including all that stuff. (As you can see from my previous post) 311 isn't that far off but would they be able to sell enough hardware and periphs to make up for that? What would the dollar amount be for their loss for you. Including all that stuff. And I know you wont forget to take retail cut out of the 300.

Here is why I get $311:

When the PS3 launched, 1 dollar was about 117 yen. If iSuppli's estimate of $840 in production cost was correct back then, that was:

$840 * 117 = 98,280 yen

Reduce that by 70%, and you get 29,484 yen, which is about $311.

 

How much do you think they'd be losing with everthing factored in?

If iSuppli's data is correct and the cost of the PS3 itself is $311 now, I'd be surprised if everything together cost $350 or near that... The controller, cables and shipping certainly shouldn't cost more than $40 to make, considering the controller is sold for something near that at retail.

If Sony sells it to retailers for $290, they can't lose more than $60 per unit.

The real question is whether iSuppli was correct or not, of course.

 



My Mario Kart Wii friend code: 2707-1866-0957

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greenmedic88 on 25 August 2009
Xxain said:
wat about the sell 13mill PS3 to be profitable thing??

Even if they sold 100 million at current production costs, they'd still be losing money on every unit sold.

What matters more is that you have a user base X million larger buying software or online purchases, contributing to greater revenue streams and profits.



JEDE3 on 25 August 2009

I think I know where I went wrong with my 280 number.

Tell me if this makes sense.

I used the 10% loss still to come up with it. But when he said that 10% number the 65nm chip set was already in the console for 1.5-2 years... something like that? And that would give it time to reduce the costs of manufacture.

When I did my estimate I didn't take that into consideration. So the 45nm chip set would be more expenisve with it falling in costs in time. So, maybe we are closer to our estimates than we are thinking. Do you think the costs over time can be reduced to closer to my estimates?



greenmedic88 on 25 August 2009

About the only better estimate that you'll get than iSupply would be a break down of manufacturing, packaging and distribution costs from SCE themselves in a quarterly financial report.

Until that happens, I'll take the iSupply estimate as being close enough.



NJ5 on 25 August 2009
JEDE3 said:
I think I know where I went wrong with my 280 number.

Tell me if this makes sense.

I used the 10% loss still to come up with it. But when he said that 10% number the 65nm chip set was already in the console for 1.5-2 years... something like that? And that would give it time to reduce the costs of manufacture.

When I did my estimate I didn't take that into consideration. So the 45nm chip set would be more expenisve with it falling in costs in time. So, maybe we are closer to our estimates than we are thinking. Do you think the costs over time can be reduced to closer to my estimates?

With time they can reduce it even more than that... but not as low as PS2's production cost, since the PS3 includes more things. For example the hard drive, which can't go below a certain cost no matter how few GBs it has.




My Mario Kart Wii friend code: 2707-1866-0957

JEDE3 on 25 August 2009
greenmedic88 said:
About the only better estimate that you'll get than iSupply would be a break down of manufacturing, packaging and distribution costs from SCE themselves in a quarterly financial report.

Until that happens, I'll take the iSupply estimate as being close enough.


i hope they do one with the slim.