The assembled pieces that make up the PlayStation 4 cost $372, and $381 after you factor in manufacturing costs, according to industry data analyst IHS, Inc. Sony still sells the new console as a loss leader – a business term referring to a product sold at a loss in order to stimulate both growth and sales of more profitable, related items – but only at first; the IHS report suggests that the natural decline in the cost of materials (likely coupled with a reduced post-launch marketing push) will lead to break-even status and even profitability sooner rather than later.
This is a marked improvement over the situation that Sony faced with the PlayStation 3 launch back in 2006. “When Sony rolled out the original model of the PlayStation 3 in 2006, our teardown analysis revealed that the console delivered supercomputer-class performance at a price equivalent to a notebook PC,” IHS analyst Andrew Rassweiler notes in the report.
“However, this achievement came with a major downside for Sony, as the [bill of materials] costs for most of the different versions of the console were in excess of the retail prices, in some cases by more than $100,” Rassweiler adds. “Although Sony brought the PlayStation 3’s costs down significantly during its lifetime, the company’s intent was never to make money on the hardware, but rather to profit through sales of games and content.”
Sony was still taking a loss on PS3 console sales with the slim unit released in 2009. The IHS teardown of that console revealed a parts and manufacturing cost of $336, versus the hardware’s $300 retail price tag.
The situation with the PS4 is considerably different. Rassweiler sees “a greatly shortened path to the hardware break-even point, or even profitability, with its cost-conscious PlayStation 4 design.” The parts and manufacturing cost attached to the new the console is reduced, he says, thanks to less money being spent on “subsystems” like the Blu-ray optical drive and the hard disk drive. Extra spending is saved for the more foundational components: the central processing unit and system memory.