It seems that sony is gonna start making money off every PS 3 it sells instead of losing money.
This with the awesome library and exclusives to come like God of War 3, Killzone 2, GT 5, Infamous, Uncharted 2, Final Fantasy versus XIII etc etc it looks like the PS3 is looking up and is making a complete 360 (excuse the pun) isn't it time to get on the PS3 bandwagon. :)
link http://news.vgchartz.com/news.php?id=2701
Business Week has an interesting article up today on the cost of manufacturing PS3. Apparently, Business Week spoke to iSupply to determine how much it costs Sony to make a PS3. When the PS3 launched in the USA, iSupply said that the 60 Gig ($600) PS3 cost $840 to make. Retailers buy products cheaper than ordinary people do, to make money on the markup, so it's entirely possible that on the 60 gig model Sony was losing as much as $300 per PS3, though ~$270 is more likely. At any rate, in 2007, iSupply estimated that the 60 gig PS3 cost $805 to make, when retailers were likely buying it for $475 or so to sell to gamers at $500. The 80 gig model had been introduced to offset that increase in losses per PS3 as the channel was cleared of the original model.
As of today though, in late 2008, iSupply estimates that the $400 PS3 costs $448 to make. Retailers likely buy the system at $360 to $380, putting the losses at under $100 per PS3 sold in the USA. Depending on where the components of the PS3 are made, the losses are either greater or less due to the currency exchange rate between the strong Yen and other currencies. In 2007 for instance, selling a PS3 to a Gamestop for $370 would bring in 42,250 Yen. Right now, selling a PS3 to a Gamestop for $370 would only bring in about 33,300 Yen. So if the cost of making PS3 is $448 at the current exchange rate, Sony is only losing about $100 per system sold in the USA when the current rate in the Yen valuation is added to the normal loss, instead of simply $370-$448. However, Sony's production prices were likely set to when the dollar still bought 115 Yen. So instead of PS3 costing 40,320 Yen to make ($448 * 90 Yen/Dollar) it's likely a case of PS3 costs equaling $448 * 115 Yen to make - 51,520 Yen. If that is the case, the situation is not as good, because Sony can only sell the $400 PS3s (retailer price of $370 * 90) for 33,300 Yen. If this is the true scenario, then the loss per PS3 sold to retail is 18,220 Yen in the USA, which is $202. In reality though, Sony has likely made some adjustments in where it manufactures goods to compensate for the currency changes, in which case ~$150 lost per PS3 serves as a compromise between the iSupply figure which likely does not account for the weak dollar compared to when Sony bought the components en masse, and the $202 figure which assumes Sony did nothing to respond to the currency changes.
Another interesting part to all of this is Europe. PS3 sells for $560 or so in Europe (outside the UK) at the current exchange rate. If the cost of making a PS3 for Europe was the same as the USA, and the exchange rates hadn't changed, Sony probably would be making a profit, as selling a PS3 to a Gamestop in Ireland for 360 Euros would bring in $504, which is more than the $448 production cost cited above to make a PS3. However, with the extra taxes, and costs of translating Playstation 3 products into other languages and different electrical voltages, whatever profit margin may have been possible is at least somewhat reduced. The real issue though is the Yen. At this time last year, 100 Yen bought only 6/10 of a Euro. Today, 100 Yen buys about 8/10 of a Euro. In other words, it takes more Euros for Sony to get the same amount of Yen revenue on PS3. So if the current model of PS3 costs $448 * 115 Yen to make because production began last year, Sony has to get 51,520 Yen per PS3 in countries with the Euro. However, at the exchange current rate, if we assume that PS3s made for Europe cost roughly the same as PS3s made for the USA, Sony gets ~360 Euro * 126 Yen/Euro for each PS3 sold to an Irish Gamestop which is only 45,360 Yen per PS3. Again, the actual costs are likely different because of what is in a European PS3 vs. an American PS3, and Sony likely has acted on currency changes by moving or altering production of PS3 components to shave the losses.
Overall though, costs of making a PS3 are dropping rapidly, and if the currency exchange rates correct to their usual levels anytime soon, Sony will be making money on each PS3 sold. iSupply estimates that Sony will be profitable on each PS3 sold in 2009, and it certainly looks possible in mainland Europe in a few months, though the USA and UK will take a bit longer.
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