Agreed, it isn't a static cost, and the gross margin will only go up over time. Making $18 a unit on the earliest units actually sounds pretty good. As others have said, the big money is in the accessories & game titles anyway.
And don't forget that they make HUGE profits on all the accessories. That controller that costs them $18 for the PS3 sells for around $55 (almost NEVER discounted), down only about $5 from when it was introduced. You can't play a game with a friend unless you buy an extra controller. I'm sure the price for additional Dual Shock 4 controllers for the PS4 will be higher, and they're spending about the same as they did on the DS3. Then there are the charging stations, alternate styles of controllers (and their special charging stations), cameras, and all the revenue from games, DLC, etc. Factor all that in and their profit margin on the consoles is irrelevant.
So two things. First they have always launched with a price close to cost. Moreover, it would be illegal to sell under cost. Second, they always price it competitively and then value engineer the heck out of it over time. Assuming that it will always cost them only $18 less than they sell it for would be a mistake of stationarity. Between the value engineering, ramping volumes and royalties from games, Sony will be just fine.
wow, only $18 difference in manufacturing and selling cost. So they have this product not only for economics but for market presence. Sony is the best in video entertainment. NIce to go through the BOM.
The game console has evolved to be an entertainment hub. It is more important to maintain and capture the market than to make a profit on the hardware alone. When buying games and videos become the norm, Sony will surely make money.
On the side line, I am curious whether PS4 supports 4K video.
It's just like printers where the manufacturer makes the money on the follow on like ink or games. Having the game console lose a little money is okay as long as the follow on products, the games, make a big profit.
As we unveil EE Times’ 2015 Silicon 60 list, journalist & Silicon 60 researcher Peter Clarke hosts a conversation on startups in the electronics industry. Panelists Dan Armbrust (investment firm Silicon Catalyst), Andrew Kau (venture capital firm Walden International), and Stan Boland (successful serial entrepreneur, former CEO of Neul, Icera) join in the live debate.