(IHS) New Consoles Not Nearly As Expensive As Last Time

Subject: General Tech, Systems | November 27, 2013 - 12:18 AM |
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.

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Easier for developers... and their CFO.

Also, check out our teardowns (and reassembly!!!) of the PS4 and the Xbox One.

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.

Update #1 (12/4/2013): IHS Electronics 360 contacted me about their full iSuppli teardown report and video for the PS4 (also the Xbox One, but that was not mentioned in their email).

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.

 

Source: iSuppli
November 27, 2013 | 06:01 AM - Posted by Branthog

As an owner of all platforms and a beefy PC, I don't feel it is enough to simply target today's PCs (a feat the consoles can't even match at launch, if you take into account the disparity in resolutions). They need to target PCs a few years down the road. Even if they *do* have to bleed a little, per console. Do you really want your customers to be tired of the way your product performs and looks by the halfway mark of your system? That was about the point people started to shift back into PC gaming (or, many, for the first time).

And it seems they should certainly be able to afford it, now that they're quickly doing away with the expense of physical goods and cramming DLC and pay-to-unlock content into almost every single full-priced game, along with wishful promises of "some sort of content" if you pay another $30 for season passes.

In fact, I feel that -- from the manufacturer and publisher side -- this is shaping up to be the most cynical generation of consoles, ever. I really can't even imagine where things will be if they continue, at this rate, another four years. Halfway into this console cycle, they may find that they've shot themselves in the foot as consumers find that they can only tolerate so much.

Or, on the other hand, maybe treating gamers like iOS users will turn out to be incredibly rewarding for them. Along with that cynical mindset usually comes a subscription to the addage "you can never go wrong, underestimating the customer".

Hell, people are paying $50 for Angry Birds on PS4 and XB1 in the thousands, after all.

November 27, 2013 | 03:21 PM - Posted by Anonymous (not verified)

There will be a new factors in gaming this time around, one being mantle, the other being Steam OS, and the build it your self steam box/pre made steam box offerings combined with the Steam client and Steam gaming ecosystem. Steam will offer all the advantages of the M$/Sony services, and the ability to have a non console prebuilt(limited) gaming PC. The Steam OS is an Open Source Linux distro that will be heavily tweaked and optimized for gaming! There will be more options once the steam boxes evolve, and in the future, there may be whole gaming box type systems on a PCI card offered, runing light weight Linux gaming distros, with CPU/GPU mashups that occupy the PCI card, and share a wide data bus, and GDDR5 memory!

November 27, 2013 | 06:28 PM - Posted by Soap Aik (not verified)

The days of the consoles giving $600-800 worth of hardware are over. However it can be argued that "graphics" have reached a point of diminishing returns for most average consumers. If some people claim they cannot tell a difference between 720p and 1080p, then most likely they won't tell a difference in any more graphical IQ enhancements.

The point is that the evolving ecosystem, and features are going to be the defining selling points moving forward for both consoles, something you won't be able to get a cohesive experience on the PC.

Of course I'm one of those who is more pro-PC than console, but you really can't argue some of the benefits of a console. The ease of just buying a game and just play it. I don't have to worry about driver compatibility issues, whether my GPU can run it at 60fps or 40fps etc. etc. That kind of stuff is sort of fun for us enthusiasts who like to tinker, but not so much for the general consumer.

I'm still hoping with the new release of the consoles, PC games will benefit. I want more games to tax the bejesus out of my GTX680.

November 27, 2013 | 07:25 PM - Posted by Anonymous (not verified)

Speaking only of graphics, consoles seem to exert a lot of 'drag'. On launch, they used to drag what was possible *up*. By mid-life, mid-range PCs had caught up, and consoles' capabilities would be a bit of an ice-cap on development.

Apparently a current mid-level PC gaming rig can already match these new consoles. If this is the case, and I already had, say, an old Athlon Phenom X6 and a GTX 660Ti, what (barring breakdowns) is going to prompt me to upgrade in the next 8 years?

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