Production costs probably reduce weekly and at worst monthly. It is one of the perks of using technology that does not need to be upgraded. New parts come out and the old parts become cheaper. With the number of transistors in computers doubling every 18 months (Moore's Law) other technology follows a similar advancement.

Kowenicki is correct in what he has stated. Right around 10% now seems logical. And March Sony feels they will reach the break even point with production cost.

that actually makes alot of sense...... lol bravo sir bravo, but profit in 2010..... hope so, so they can keep giving us these top of line exclusives^^

LOL...on fantasy island, Sony is making boatloads of money off each PS3 sold...in reality, we will see in a few months jsut how bad it is...if last quarter was any indication...Sony might end up losing over $1 bln in 2 quarters.

^^r u forgetting how bad Vaio, and Erricsson is doing?

Well since the console itself is a loss leader, if they are making money on it they need to cut the price.

Beside you can never know the specific amount for individual pieces of hardware, they are corporate secrets always obscured with smoke and mirrors.
Their financial reports will only give the vaguest of guesses even for a listed company.

How do you figure when they project a billion dollar loss for the FULL year? Quit spreading blatant lies. I hope they ban you.

Source

You explained the fix costs pretty well.

just to be a smart ass you forgot somethings aswell:

You forgot to mention that Sony first had to develop a new cake and that time is money aswell.

To invent a new cake you have to invest some time and after you invented him you have to spend time doing the cake and you have to use some energy too. And you have to take in account even your house and kitchen costs. For privat persons it is a ridicolous low amount but fo a company its a giant amount because the facilitys dont serve other purposes.

This is a pretty good description of economies of scale but just slightly oversimplified.  That is, it doesn't take into account the other associated costs of production; for example one mixer may be able to make 100 cakes a day with 1 cook, but if you needed 200 cakes a day you'd need two mixers and two cooks, so both your fixed costs and capital costs go up, etc. etc.

The idea that costs are reduced weekly, is also a little...well optimistic.  EVEN if all of your supplies dropped in costs weekly (highly unlikely), no production line inventory system is accurate enough to have a weekly account of each item needed so that each component would be needed, exactly when the newer, lower cost component was available.

ALL that being said, I am sure that the total loss per console is diminishing, and will soon reach a point where it is equal to or above production costs.  I'm hesitant to believe that that would ensure SONY profitability though, I'd guess it would just help mitigate the losses.  NONE of which I think means "Sony sucks" or "Sony is doomed" though (before i get branded a hater!)...

@kowenicki

Yes I agree. But if you want to calculate a price that is right for the PS3 you have to slash the RD Costs onto it. I never heard of a Company which dont take the R and D costs into account because they spend it years before the launch.

And energy costs are likely to rise yes I just wanted to add which costs every Company calculates in the cost of a Product and the Develoments costs are like a mixer they calculate them into the fix costs aswell. The Intern Calculation of a company takes everything into contemplative even things which are unknown for outsiders.

I'm calm. Just tired of this Sony is doomed banter. Barring another financial collapse, there is no chance that Sony loses that much in the remainder of the year. However, anything could happen. Maybe MS collapses? See what I did there?