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Kinnar
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CEO
This way they are increasing presence like set-top box
Kinnar   11/23/2013 1:19:11 AM
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The cost calculation is not counting the marketing, stocking, transaction and other processing costs, if we include those costs, Sony will be selling the product making loss.

But at the same time, this will be a device like set-top box that continuous gives you recurring income form the content being delivered during the lifetime of the product.

AZskibum
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CEO
Re: Nor new and not a static cost
AZskibum   11/20/2013 9:09:20 PM
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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.

krisi
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CEO
Re: Entertainment Hub
krisi   11/20/2013 1:20:10 PM
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So I guess this is cell phone business model...sell hardware at cost and make up money later on accessories and services/games

jmumford913
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Rookie
Re: Entertainment Hub
jmumford913   11/20/2013 12:55:53 PM
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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.

Some Guy
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Manager
Nor new and not a static cost
Some Guy   11/20/2013 12:47:35 PM
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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.

krisi
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CEO
Re: Entertainment Hub
krisi   11/20/2013 11:32:08 AM
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Long way down to $200 to achieve circa 50% gross profit margin!

R_Colin_Johnson
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Blogger
Re: Entertainment Hub
R_Colin_Johnson   11/20/2013 10:43:49 AM
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@ xSheetal.Pandey So they have this product not only for economics but for market presence.

Also as volume ramps up Sony should be able to increase its margins due to economies of scale, and as it redesigns the console in coming years the BOM will go down just like it did for PS3.

Sheetal.Pandey
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Manager
Re: Entertainment Hub
Sheetal.Pandey   11/20/2013 8:47:09 AM
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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.

chanj0
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CEO
Entertainment Hub
chanj0   11/19/2013 10:36:36 PM
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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.

daleste
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CEO
Re: Xbox comparison
daleste   11/19/2013 10:08:49 PM
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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.

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