Sony expects PS4 profitability to mimic PS2 more than PS3

Executive Fergal Gara says PlayStation 4 is nowhere near the financial burden that the PlayStation 3 was.

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The PS3 was famously expensive to produce and Sony struggled to make a profit on the system for some time. The same will not be true for the PlayStation 4, Sony UK MD Fergal Gara told Bloomberg TV in a new video interview.

The PlayStation 4's economics, that is, the business conditions surrounding the production of the system that ultimately dictate profitability, are closer to the PlayStation 2 than the PlayStation 3, he explained.

"The economics of PS4 are far closer to the economics of PS2 than they are to PS3. So if you consider with PS3, it was a highly bespoke architecture; it was expensive to make. And we weren't making money on many of those devices, even at a high price point," Gara said. "With PS4 we come at it at a very lean price point and our economics will be far, far [more] favorable to the PS3. So that is a job to be commended really for the internal team and of course it's done with the gamer in mind."

A teardown analysis from IHS released last week concluded that the sum of the PS4's components was $381, just under the system's $399 price tag. When factoring in the cut retailers take and other related fees, it is unlikely Sony is pulling a profit on every system sold, at least not right now.

For now, Sony will look to software and services for profitability. At the same time, the PS4's components are expected to come down in price over time, which would also benefit Sony.

With the PS4 only just released in North America two weeks ago (and its launch in Europe on Friday), it is unlikely the system will see an official price cut anytime soon. That said, Activision Blizzard CEO said earlier this month that price cuts for the PS4--and Xbox One for that matter--are likely to come sooner than they did for PS3 and Xbox 360, thanks to greater manufacturing efficiency.

Discussion

509 comments
mjf249
mjf249

I have high hopes for the PS4, the buzz was definitely similar to the PS2(which was my favorite console of all time).

tightwad34
tightwad34

Even if the PS4 costed Sony more to make I wouldn't mind them charging more. I always think about it like if I'm investing  in a console I will use for years I will get my moneys worth unless the pricetag is completely absurd. I would say even $600 or a bit more isn't too much for something you are going to use for years on end. I was a couple years late getting my PS3 but I think I got every penny out of it and then some.

zaiwen
zaiwen

bring in new ips, more exclusives & bring back rpgs


go playstation!!!

PlatinumPaladin
PlatinumPaladin

This comes as no real surprise. I wonder if Sony had the console's outward appearance designed with this in mind, in an attempt to harken back to the good old days.

astral171988
astral171988

You can't really match the PS2 until you have the same number of Shin Megami Tensei titles as the PS2 did

prats93
prats93

But without the 3rd party exclusives, or exclusives in general, it will be hard to reach the tumultuous highs that the Ps2 reached back in the day. Naughty Dog can only get you so far.

noandno
noandno

I'm not sure if it will match the PS2, though

TenraiSenshi
TenraiSenshi

Well I think that's a fair assessment given that the PS3 cost over $200 more to make than it retailed for, which equated to a massive loss post launch for Sony until they got manufacturing costs down. This time around, things are looking a lot better for the launch of the PS4 and there's no need to guess why. 

warriors30
warriors30

While everyone else is enjoying their fancy new consoles I've started replaying some old PS2 games. Mostly Persona 4 and this game is still beautiful in so many ways, I'm thinking about playing through the whole thing again...The PS2's library was incredible, I'm just waiting for the "right" game to come out before I buy a PS4. 

wasakawaka
wasakawaka

This system needs the vita to fully realize the potential. I love being able to play the ps4 on the vita in my bed before I go to sleep.

megamatics
megamatics

Gonna really need to start announcing games... Knack was a mediocre start but honestly Jak 4 would of been better imo. 

Monsterkillah
Monsterkillah

PS4 no doubt will be a success

It already surpassed PS2 launch with 1 million system sold less in 24 hours just in NA


insloanwetrust
insloanwetrust

So the PS4 costs $381 to make and retails for $399. The Xbox one costs $471 to make and retails for $499. That's including the cost of the Kinect that comes with the Xbox one both in terms of cost to make and retail price. $18 profit for Sony and $28 profit for Microsoft then. Obviously not including all the extra stuff like shipping, marketing etc that will mean both consoles sell at a loss.

Barighm
Barighm

I doubt it will match the PS2, but I can see the PS4 selling 100 million. PS2 had like no competition.

uncagedpaul_86
uncagedpaul_86

Is it true that the ps4s for the American launch were built in China and that the European ps4s are built in Japan? That's the reason the guy at my Local GAME store told me, which makes sense as to why a lot of the American ps4s are faulty. Hope mine is in working order come friday

Alucard_Prime
Alucard_Prime

Good stuff, I wouldn't want the company that "defined gaming" and that delivers "greatness" to go out of business. I am seriously considering getting a PS4 in 2014 as my secondary console, I'm just waiting for more good exclusives to come out, but after seeing the story about the Steam box today, I'm not so sure anymore. Competition is great for the consumer, simple as that.

tightwad34
tightwad34

@zaiwen I think they are doing a good job of brining back rpgs. They never went anywhere, they were just hiding and some of them still are. They just need to find them as well as new ideas to keep things fresh. Good thing with RPGs is you can't milk them to the point of coming out with yearly rehashes. If you want a ton of RPGs to play I would suggest getting a 3DS. It already has quite a few but in a year or so it will have millions.

bunchanumbers
bunchanumbers

@warriors30 I played my first Shin Megami Tensei game maybe a month ago. I had no idea what I missed out on. Great game. 

PlatinumPaladin
PlatinumPaladin

@Monsterkillah That may be true, but don't forget that was over a decade ago. When the PS2 came out it was still a relatively niche hobby. It didn't have anywhere near the exposure gaming has today.

DannyB513
DannyB513

@elegantspock What people don't understand as well is that between the original Xbox and the RROD fiasco on the 360 that MS took over a 2 billion dollar hit. They say that the One is profitable but I don't see how seeing as just like the PS4, The One's manufacturing costs are right under what they selling it for. I agree that the PS3 almost cost Sony everything. Thankfully Sony learned a hard lesson that they are not repeating again. 

Monsterkillah
Monsterkillah

@elegantspock  

I dont get it PS3 is a disaster with all their tons exc games?

sold over 80 mill a disaster for u? the 360 prty much tied up at that numbers too

U do know its Ms who hae the plans to shut down the xbox gaming division right?

theyve been oosing 2 bill for third consecutive years and have to do cross fundinf to cover the loss from xbox division hence why Ms try to focus on PC and the uprising tablet gaming

jhcho2
jhcho2

@insloanwetrust  

All that doesn't matter. The fact is, the ps3, after being broken down, already costs more than the retail price. Whether Sony is selling the ps4 at a loss or not is irrelevant. All we know is, they oss much more with the ps3. It's a relative thing.

Manatassix
Manatassix

@Barighm 

PS2 had the same competition that the PS3 had Sony just screwed up the design and misunderstood the market giving Microsoft the opportunity to level the playing field and become the feature and sales lead for most of that generation.

Things are looking very different this time round with the PS4 selling the same in a single territory as the Xbox sold in 13 in the same time period… however the Xbox releasing in those other territories first could also be an important factor…

Basically this generation is anyones to win especially with the flexibility of these new consoles built to adapt to a changing market… should get really interesting :)

insloanwetrust
insloanwetrust

@Barighm PS2 had Competition with the Xbox but if you mean in terms of real competition then you're right it had no competition.

DannyB513
DannyB513

@uncagedpaul_86 Saw a report the other day that Foxconn are now wanting to build factories in the US. Hopefully they won't need to install the suicide nets on the buildings.

Manatassix
Manatassix

@uncagedpaul_86 

No he's talking garbage… 

Employees at shops like Gamestop are not experts you can reliably use as sources of information they are sales reps. 

DannyB513
DannyB513

@elegantspock LOL!!! Nice try troll. With all the advertising that MS has on here and IGN, I would say that MS has has both websites in their pocket.

Lhomity
Lhomity

@elegantspock Wow they must have some very big pockets to fit all those people inside! I can fit, like, my wallet and maybe my phone. But I don't have a big waist, so maybe that's it...

bunchanumbers
bunchanumbers

@Alucard_Prime I really have no problem with most of their campaign stuff. The only one that rubbed me the wrong way was that native 1080p makes you a better gamer. 

Jinzo_111887
Jinzo_111887

@Alucard_Prime Greatness? If PS+ is so great, Sony wouldn't be pushing it by requiring it for online multiplayer. Unless they plan to phase out what makes it great, I can't see a reason because it's overkill.

arqe
arqe

@Monsterkillah

1. Doesnt matter they got tons of games or not , PlayStation 3 was a Disaster. They almost lost all their Profits from Ps1 and Ps2.

2. And yes 80 Million is a disaster when you compare the console before Ps3 which is Ps2 sold 160 Million , and they lost their half of the customer base. 

3. Microsoft today , still making money out of Xbox 360. They never lost money because of the console. Some shitty tech sites "Rumored" this and there is nothing more.Like i said , they still making money.

Manatassix
Manatassix

@Monsterkillah 

It was a relative 'disaster' if you compare Sony's position with the PS2 which completely dominated the gaming market with overwhelming sales and unlike the success of the Wii last gen it had a much higher attach rate… Basically the PS2 was the most successful console in history and the PS3 lost them not only the lead but also large amounts of money…   For sony that was a disaster compared to the 360 which took the Xbox brand into the lead position between the two and massively increased Microsofts market share over the original Xbox.

However removing the relative positions of the previous Gen both the PS3 and 360 did pretty much the same in terms of sales by the end of the generation. Its only a matter of relative perspective. 

The PS4 however is looking to be far more successful interestingly the Xbox is also showing some strong sales. This simply indicates a much increased demand for more powerful hardware and an expanded Console audience… 

The numbers are flying in the face of the nay sayers who predicted that the success of tablet and smart phone games would drive people away from the Consoles it appears to be having the opposite effect at this point and bringing new people into the medium expanding the audience for everyone.

Manatassix
Manatassix

@thetravman @insloanwetrust 

Not only do they not include either shipping or marketing they are part-custom parts not off the shelf bought at huge reductions to cost because of the wholesale manufacturing and buying power of such a big company, its also not including the retail cut and Taxes. 

Sony are selling the PS4 at somewhat of a loss but nowhere near the losses of the PS3 however that will change quickly as the chips become cheaper to mass produce especially with these sales numbers.

DannyB513
DannyB513

@insloanwetrust Yeah Sony had a 13 month head start with the PS2 over the original Xbox and outsold it by about 90 million consoles. Well over 100 million PS2's sold. Right around 20-24 million Xbox's sold. Sony got to arrogant and lost over half their market share with the PS3. 

jadaski1
jadaski1

@bubba_1988 @uncagedpaul_86 Actually, I read an article with images of a PS4 destined for Europe with Made In Japan text on the device and box.

Alucard_Prime
Alucard_Prime

@bunchanumbersHehe yeah, I know what you mean. I'm just kidding around. But I am serious about the Steam box now. Seems pretty compelling from what I've seen so far, will wait to see how this compares to the PS4 before making a decision....right now I'm in gaming bliss with my Xbox1, so I'm not in a rush.

Manatassix
Manatassix

@Jinzo_111887 

Its a simple matter of paying for servers… Sony couldn't possibly compete with Microsofts Xbox live if they continued to provide server support for free… that would be idiotic.

Personally I find PS+ to be a complete bargain… I'm paying next to nothing and having free high quality relatively recent games thrown at me constantly across all 3 of my consoles… in comparison Microsofts offerings of 2 free games a month of older cheap games I could pick up for $5 a pop anyway is looking a bit pathetic… Understandably its going to take time for them to get that service going, but its pretty embarrassing in comparison at this point.

streamline
streamline

@Jinzo_111887 If Sony thinks it is good enough that people will be willing to pay for it, then it makes sense for them to make money off of it. Same thinking behind MS and why they think the Kinect, voice commands, and entertainment hub is worth bundling into one package, though, Sony isn't that confident to make PS+ a required fee for people who don't care much about multiplayer.

prats93
prats93

@arqe @Monsterkillah Correction: The Ps3 was a disaster in the beginning. But then came the best turn around ever seen in console history, completely trumping the 360 with far better exclusives. Overall the PS3 has outsold the 360, even considering that a large percentage of 360 sales were rebuys from the RROD disaster.

bunchanumbers
bunchanumbers

@arqe @Monsterkillah it was an absolute disaster. They didn't plan it out well enough and spent too much on the hardware. Sony lost 300$ on every ps3 sold. It did eat all their profits from the ps1 and the ps2. 


Jinzo_111887
Jinzo_111887

@streamline There is a difference between profiting from something and trying to use it to grab every penny they can get for whatever excuse they have to offer. Many people are already paying for it for the games. That's probably why most people don't care since they get random games with it. Pushing it for online multiplayer means Sony gets $0 from those people.