(IHS) New Consoles Not Nearly As Expensive As Last Time
Subject: General Tech, Systems | November 27, 2013 - 12:18 AM | Scott Michaud
Tagged: xbox one, ps4, IHS
Parts and labor costs have surfaced for the Xbox One and Playstation 4. Last time around, both Microsoft and Sony were bleeding over a hundred dollars each time a console was produced and sold before you even consider research, development, support, and so forth. This time, both are fluttering around the break-even point.
Console fans commonly say, "You cannot build an equivalent gaming PC for what I can get a console for." My response has been, "Correct and neither can Sony or Microsoft; they are bleeding to gouge you later. Add up those license fees and PC gaming is often cheaper." That may change.
Easier for developers... and their CFO.
While it has not changed that PC gaming can still be cheaper, because it has less middlemen demanding license fees, the consoles might not be losing as much money. Last week, IHS iSuppli inventoried the Playstation 4 and determined that it costs Sony around $381 USD for every $399 console they sell. The Xbox One has also had its turn: $471 USD for the $499 device.
This may seem a lot, but the $499 launch PS3 (20GB) cost Sony $805.85 in parts and labor. The Xbox 360 was less devastating for Microsoft at a cost of $525 for their $399 console. None of these fees include research, development, support, store markup (if they are allowed any), etc.
The last generation of consoles, despite its length, may or may not have delivered any profit for either party. The recent several quarters of profits are easily offset by many more of losses. I expect that neither company is interested in repeating the last generation. It hurt.
But the consoles, despite being cheaper than last time, could still have a reasonable lifespan. A large chunk of the original PS3 bill of materials was the hardware "Emotion Engine" (most links are broken by now but I believe it was about as much per chip as the Cell processor). The consoles are now based upon commodity PC hardware. They can finally take advantage of the competition between other companies to focus their research and development costs on the platform itself.