We have lost our minds, $33,000 for a playstation 3

http://cgi.ebay.com ^ | 11-17-2006 | edcoil

[The_Victor]

This week, iSuppli conducted a similar cost-analysis study of the PlayStation 3--with even more shocking results. According to the study, the hardware for the 20-gigabyte PS3 costs $805.85 alone

OK, so it's an estimate based upon a guessed cost of components. I don't believe for a second that Sony is going to put a product on the market that costs them more to produce than they earn on the sale. In business that's called suicide. Without knowledge of Sony's negotiated prices with suppliers the guess is isn't worth much.

Now, having said that, I think they would they produce the first units at a loss expecting the unit price to drop at the manufacturing becomes more efficient. But according to iSuppli's analysis, Sony will never make a profit on the PS3. Sorry, I'm still skeptical.

[Muzzle_em]

LOL!

[Muzzle_em]

I have an aunt who told me of getting into a snatching fight with another woman over some doll that was popular back in the mid-60's, so this is nothing new.

I guess the short supply of these things around Christmas, followed by the ensuing violence generates free publicity.
It is NO accident that there is always a limited supply before Christmas.

[N. Theknow]

John Edwards can get it for you cheaper at Wal-Mart.

[kenth]

Heck, just think of the yearly fights as some stores open for their Christmas sales. It's crazy.

But then, I can think of no better way to honor the birth of Jesus than raining blows down upon the man or woman who tried to grab the sale item I was going after.

[KeyesPlease]

"I don't believe for a second that Sony is going to put a product on the market that costs them more to produce than they earn on the sale. In business that's called suicide."

Could be they're banking on keeping the price on the unit low enough so that they can recoup and profit on game sales. Don't know for sure, but I'd guess the margins on the games are pretty high.

[jdm]

$75 S&H? LOL.

[The_Victor]

Could be they're banking on keeping the price on the unit low enough so that they can recoup and profit on game sales. Don't know for sure, but I'd guess the margins on the games are pretty high.

It was pointed out to me on another thread that the royalties and fees for the games sales could help makeup the difference. Like cell phone hardware being the loss leader for the service contract.

But if that's the case then my original point, that consumer complaints about the hardware cost and poor sales following the holiday (big if), would lead to the price of the PS3 by next summer being dramatically reduced.

[MPJackal]

"Sony is losing 300 dollars per machine"

It may be true they are losing a few bucks per system, but the real money is in the games. $50.00 a pop. Probably cost less than $10.00 to produce. Most kids will have 15-20 games within a year. So Sony will get a little something something out of it.

[CollegeRepublican]

It is similar to selling razors and razor blades. The razor might be cheap, but the razor blades are expensive. Games at $59.99, extra controllers, and other accessories that have jacked up prices. Plus Sony is trying to get Blu-Ray players established in people homes instead of HD-DVD (Toshiba). Large companies are willing to take an upfront loss for future profits. Sony is gambling literally billions of dollars on their gaming unit. If the PS3 fails, Sony could be in trouble.

[aft_lizard]

Thats the nature of the beast. The real money is not made on the equipment anyways its made on accesories and games. iSupply is right on when considering the fact you have new technologies in the cell processor(which is only getting 30% yields), a top of the line power pc processor, a brand new format and drive and controllers that are newly designed. The turn around on profit on the machine itself will not happen until manufacturing each component drops precipitously then you will see a price drop on the machine as a whole. If you actually think they are making money on the machine right now then I suggest you do some research.

[aft_lizard]

I forgot to mention MS lost 4 billion on the original x-box, and they readily admitted to it. They said in order for them to take over the business they had to overspend. Its a common business tactic when entering a new market if you are a major company.

[cwb]

"Sony is intentionally under supplying the market to create hype."

---

While that may seem like the plan, the truth is that Sony just doesn't have enough Blu-Ray devices to meet production demands until after the first of the year. Part of the plan with the PS3 isn't just its appeal to the gaming crowd...and getting it out before the others; it's also Sony's version of a Trojan Horse in their attempt to get BluRay HD-DVD disc players into the hands of more consumers as they go head-to-head with HD-DVD in a format war.

Sony is hoping the hype over PS3 will introduce a whole new segment of consumers to their BluRay HD-DVD Disc technology so they can get an advantage over the competing HD-DVD format. By flooding the market with as many PS3 as they can, they hope to do just that. And whatever loss they may actually suffer as a result of production costs, they hope to make that up as they re-introduce their library of films in the new HD format. We shall see if it works or not.

[The_Victor]

If you actually think they are making money on the machine right now then I suggest you do some research.

As was pointed out to me which I included in post 48, the system is brining in more money than just the hardware. Sony may be taking a loss on the hardware (although I'm still skeptical of any analysis that doesn't include Sony's internal cost numbers) but I'll garantee they are not taking a loss on the project as a whole. And upon considering other income sources, that point seems appropriate. So that takes me back to my original assertion, which you refuted by using the hardware costs, that the console price may well drop, like the PS1 and PS2 did, within a year of their introduction. I guess only the reality of time will tell.