Since its launch three years ago, Sony's PlayStation 3 has always been more expensive than its rivals, Microsoft's Xbox 360 and Nintendo's Wii, in large part because the components in the PS3 cost so much to assemble.
At launch, for example, the console cost Sony about $805 to build, according to technology research firm iSuppli, with the highest-priced version selling for $599.
According to a report, the component costs of the Sony PlayStation 3 may finally mean the company is closing in on break-even for the console.
(Credit: Sony Computer Entertainment of America)But now, a new iSuppli report issued Friday suggests that Sony may finally be nearing the break-even point with the PS3. It said that its teardown analysis service estimated that the design cost of the new 120-gigabyte PS3 Slim comes in around $336, while it sells for $299 in the U.S.
That means that while Sony is still losing about $37 per unit--plus somewhat more for marketing, royalties, box contents, and other expenses--it is for the first time closing in on breaking even with the console itself.
A Sony representative said Friday the company has a policy never to comment on the cost structure and breakdown of its hardware.
According to iSuppli, its 2008 analysis of the PS3's component costs showed that the then-$399 console was losing at least $50 per unit. So it's notable that even at the lower price, Sony is losing less money. Further, the analysis firm suggested that with component costs dropping rapidly, Sony could soon find itself making money on the PS3.
To be sure, companies like Sony, Microsoft and Nintendo are willing to subsidize the cost of their video game consoles because they make their real money on sales--and royalties--of games. The more consoles they can put in consumers' living rooms, even if they take losses on them, the more they can make on the games.
But Sony took a beating in the media in the early days of the PS3 because it was losing so much on each PS3, not to mention that the high cost of the console made it an unattractive buy.
Now, with the August release of the PS3 Slim, and its reduced price, the console is finally coming close to matching its rivals' sales numbers. In September, the PS3 even won its first-ever month, as measured by total console sales. In November, however, the benefits of a great deal of pent-up demand for a lower-priced PS3 seemed to have been played out, and once again, the PS3 came in third, trailing the Wii and the Xbox.
Still, the PS3 was only marginally behind the Xbox in units sold in November, and there certainly seems to be renewed enthusiasm for the console at the lower price.
And when Sony finally sees a profit on each PS3 sale, there will no doubt even be smiles in the company's board room. Stay tuned to see when that actually happens.
Updated at 1:05 p.m. PST with a response from Sony.
People always talk about dog years, or cat years, but what about video game console years?
It's hard to know what that math is, but one thing is certain: Sony's PlayStation 2 turned 9 years old Wednesday, and it sure feels like the best-selling video game console of all time has been around a whole lot longer than that.
Yet even though we're already more than three years into the PlayStation 3/Xbox 360/Wii console generation, the PS2 is still going strong. Routinely, month after month, its sales are in six figures--146,000 in September in the United States alone, according to The NPD Group--and there's no reason to think the 485 (and counting) developers who have made games for the platform are going to stop any time soon.
The PS2 turned 9 on Wednesday. What's that in video game years, if dog and cat years are equal to 7 human years?
(Credit: Sony)In large part, that's because there are millions of people for whom the world-beating processing power of the PS3 and the Xbox 360, and the graphics-so-good-you-can-see-beads-of-sweat-on-sports-players'-bodies aren't worth paying several hundred dollars for. For $100, they say, you can get one heck of a good video game playing experience with a PS2.
It "still holds a place in my heart--there's so many great games with huge amounts of replay value," said Michael Steavenson, a public relations professional who bought his PS2 around 2001. "I'm not so interested in blazingly fast processing speeds, graphics that make games look like a movie, or uber-cutting-edge hardware stats. If the game is well-designed, fun to play, and provides me with a good emotional connection, I'll play it forever."
According to Sony, one out of every three U.S. households owns a PS2, and, worldwide, almost 140 million people have one. To date, Americans have bought more than half a billion PS2 games, and all told, nearly 10,000 titles have been released for the platform. Not bad for a machine that has earned the right to be living out its golden years sitting on a porch somewhere, smoking a cigar and grumbling about kids these days.
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If you're aiming to be green these days, I'm afraid I have to counsel you to turn the power off on your next-generation video game console.
The PlayStation 3 was found by an Australian research group to be one of the most power-hungry consumer electronics devices in the world, even when in stand-by mode.
(Credit: Sony Computer Entertainment of America)According to Reuters, an Australian research firm has concluded that machines like Sony's PlayStation 3 and Microsoft's Xbox 360 lead the field when it comes to consumer electronics that consume the most power.
And no, not using them is not enough. As the Australian researchers at Choice found, the machines continue to gobble up power, even when they're in stand-by mode.
The PS3 topped Choice's list, followed by the Xbox and then plasma flat-screen TVs, Reuters reported.
"Our tests found that leaving a PlayStation 3 on while not in use would cost...almost five times more than it would take to run a refrigerator for the same yearly period," Choice wrote in its study.
On June 10, Geek Gestalt hits the highways for Road Trip 2008. I'll start in Orlando, Fla., and visit many of the South's most interesting destinations. Stay tuned, and be sure to keep up, both now and during the trip, with what I'm doing on Twitter.
Video game console makers have tended to operate on approximately five-year cycles. That is, the manufacturers generally wait about five years between new consoles, give or take a year.
For example, Sony's PlayStation 2 was released in 2000 and its PlayStation 3 in 2006. Microsoft's original Xbox came out in 2001 and its Xbox 360 in 2005. And Nintendo's GameCube first launched in 2001, and its Wii hit store shelves in 2006.
But with the release of the so-called next generation of consoles--with the 2005 release of the Xbox 360 and the 2006 release of the Wii and the PS3--it began to look like the companies might be ready to wait a little longer between cycles.
Of course, Sony has maintained all along that its consoles actually have 10-year lives, and it has a good point: The PS2 is still selling quite well, having moved 124,400 units last month, according to market researcher NPD Group. And Sony clearly expects to produce PS3s well into the next decade.
But as it demonstrated by putting out the PS3 in 2006, the continued life of an existing console hasn't stopped Sony from moving on to a future generation.
So, as we get closer to the two-year anniversary of the launch of the Wii and PS3 and the three-year anniversary of the Xbox 360, it's only natural to wonder whether the next round of machines is on its way. But according to analysts and representatives of the three manufacturers, we shouldn't be holding our collective breath for any imminent announcements.
"This (cycle), I think, lasts longer," said Michael Pachter, a video games industry analyst with Wedbush Morgan Securities. "I don't think Sony and Microsoft can afford to go back to the drawing board."
More likely, added Pachter, is that Microsoft--and possibly Nintendo--will try to make iterative improvements to their existing consoles, but keep the guts of the machines.
For example, Pachter said, he would expect Microsoft to try to put out a new version of the Xbox 360 that comes with a 500GB or 2TB hard drive and Wi-Fi functionality built in. Currently, hard drives and Wi-Fi are add-ons for the console.
"They'll go back and try to one-up Sony," Pachter said. "They may have to ultimately give away a Blu-ray drive."
That, of course, is a nod to the fact that Sony has included a Blu-ray player in the PS3 from day one, a move that initially added a significant amount to what the company had to charge for the console, but which over time, is likely to make the PS3 a much more attractive machine.
The most likely scenario, according to analysts, is that the Nintendo Wii will be upgraded to include high-definition capability, but not be immediately replaced with a 'Wii 2.'
(Credit: Nintendo)And instead of releasing a Wii 2, Pachter said, Nintendo may decide to add high-definition capability to the existing console.
Not everyone agrees with Pachter, of course.
In a report forecasting the next four years of the video game industry, IDC analyst Billy Pidgeon predicted that the next console generation could arrive in as little as two years.
"IDC expects next-generation launches to begin in 2010 with successive Microsoft and Nintendo consoles likely," Pidgeon wrote. "Sony is likely to hold off a next-generation launch until 2012 or later."
Of course, it's probably far too early to tell what the next cycle of consoles will feature, and in his report, Pidgeon doesn't address the next round of major improvements.
But one would have to assume that for the companies to put in the time and energy needed to create entirely new consoles, they would have to be built around significant upgrades. And in one sense, that's hard to imagine.
"I really don't see how the boxes need to get any faster," Pachter said. "The boxes are ridiculous right now. No one's going to write code that requires the processing power of these boxes for 7 to 10 years."
For their part, the manufacturers are, not surprisingly, playing coy about their future console plans.
"Is there a next generation?" said Aaron Greenberg, director of product management for Xbox 360 and Xbox Live. "I don't know. It's hard to think about that right now...It feels like we still have a lot of growth between where we are and (the sales) ceiling" of the current generation.
Greenberg said he thinks that Microsoft still has plenty of opportunities to "leverage the platform we have," in particular because the company hopes that the biggest growth for the Xbox will be in its online component.
"Everyone has realized that consoles can continue to sell for quite an extended period of time," he said. "It feels a little premature to think about what (the next) generation might be like. We're always thinking about the future, but we have no plans for years to launch another console."
If you think that Greenberg was playing it too coy, his responses were little different than that of his rivals.
Nintendo of America's vice president of corporate affairs, Denise Kaigler, would barely address the issue when I asked her.
"I'm sure everyone has a different idea on when that should happen," Kaigler said. "We're happy that people are still discovering Wii and having fun with it."
And Sony, as expected, took the position that the PS3 itself is its console of the future.
"We have always said we believe PS3 has a 10-year product life cycle," said Patrick Seybold, the director of corporate communications and social media for Sony Computer Entertainment America. "We've only begun to scratch the surface with PS3...Our investment in future technology is important, and we continue to look at advances in technology to see where we would benchmark our next-generation product. But right now, PS3 is just hitting its stride, and we'll continue to focus on driving the development of games that tap the full resources of PS3."
On June 10, Geek Gestalt hits the highways for Road Trip 2008. I'll start in Orlando, Fla., and visit many of the South's most interesting destinations. Stay tuned, and be sure to keep up, both now and during the trip, with what I'm doing on Twitter.
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