SONY Looking to Break-Even on Playstation 3 Consoles


via WSJ

Sony Corp. is closer to breaking even on its new-generation PlayStation 3 videogame console because it costs 35% less to make than the previous model, according to technology-research firm iSuppli Corp.

The electronics giant is locked in a battle with Nintendo Co.’s Wii and Microsoft Corp.’s Xbox 360 for control of the videogame-console market. The cost cuts could help stanch the hardware red ink at Sony, which sold the previous-generation PS3 at a significant loss, making up for it with game-title sales and royalties.

Integration and key changes in components has brought the latest PS3’s cost down to $448.73 from $690.23 for the first-generation model, said iSuppli.

The PS3 sells for about $399 in the U.S., at least $150 more than Wii and Xbox 360. However, the PS3 accounted for 16% of global videogame-unit shipments in the second quarter of 2008, second only to Nintendo’s Wii, which accounted for 54% of the market.

Andrew Rassweiler of iSuppli predicted the PS3 may be able to break even in 2009 with further hardware revisions.

Part of the decline in cost is the result of “the normal learning curve and supply/demand factors that bring component prices down over time,” iSuppli said.

Also, integration of components into the core silicon of the PS3 cut the number of individual parts to an estimated 2,820 from 4,048 in the previous-generation model with a 60-gigabyte hard drive.

The cost estimate of $448.73 doesn’t include software, box contents and royalty expenses.

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