Chief financial officer of Sony Corp. said during the company’s conference call with financial analysts that manufacturing cost of Sony PlayStation 3 has dropped by 70% since the introduction. This may mean that production cost of the PS3 is now about $250 and Sony may be actually making money selling the hardware, thus, may consider a price-cut.
“The cost reduction since we introduced the PS3 is very substantial and this is on schedule. We do not disclose how much of the PS3, specifically, the cost reduction was achieved during the past two years, but that is on schedule,” said Nobuyuki Oneda, chief financial officer of Sony Corp. during the conference call. When asked to give an approximate reduction percentage, he replied: “About 70%, roughly speaking”.
Back in 2006 Sony PlayStation 3 20GB and PlayStation 3 60GB video game consoles cost $805.85 and $840.35 to manufacture, respectively. At that time Sony sold its consoles for $499 and $599 and lost $306.85 and $241.25 on 20GB and 60GB versions hardware alone, respectively. Based on teardown analysis in late 2008, Sony PlayStation 3 cost Sony around $448 to build.
At present Sony Computer Entertainment sells PS3 80GB for $399 and PS3 160GB for $499. Even though it is unclear how much does each model cost for Sony, it is almost certain that the company is making profit even on the PS3 80GB, provided that manufacturing fee is about $250.
It is ordinary for game console makers to lose money on hardware, and make up for the loss via video game-title sales. Therefore, it is logical to expect Sony to reduce pricing of the PlayStation 3 to drive volume sales.