Report: PS3 to sell for $399, cost $494 to make

  • By Staff, GameSpot
  • Posted Jun 28, 2005 4:01 pm PT

Merrill Lynch Japan predicts Sony will lose more than $1 billion on hardware during its next-gen console's first year on the market--a sum it may not be able to recoup.

According to the latest issue of Japanese magazine Toyo Keizai, Merrill Lynch Japan Securities has recently calculated an analysis that the production of a single PlayStation 3 console will cost Sony approximately 54,000 yen to make ($494), as of its initial release in 2006.

Merrill Lynch Japan estimates that the machine's main components--namely its Cell chip, RSX, and BD-ROM drive--will cost about 11,000 yen ($101) each. After adding the other electronics that will be used in the PS3, the machine's production cost goes up to 54,000 yen.

Given that Sony's PS3 will face stiff competition from Microsoft's Xbox 360, the chances that Sony will release its console at its production cost is slim. Under the assumption that the Xbox 360 is expected to sell at around $299, Merrill Lynch Japan predicts that Sony will sell each PS3 at the price of 44,800 yen ($410) in Japan and $399 in America. That would mean Sony would suffer a loss of more than 130 billion yen ($1.18 billion) during the first year of the PS3's release.

By comparison, the PlayStation 2 cost 39,800 yen ($364) in Japan and $299 in America when it launched in 2000. During its first year of release, Sony Computer Entertainment suffered a loss of 51.1 billion yen ($458 million), but it recovered the next year with a profit of 82.9 billion yen ($759 million), followed by 112.6 billion yen ($1.03 billion) the year after.

It is normal for game companies to take a loss on hardware whenever a new console launches, since they typically focus on acquiring market share rather than generating a profit during the first year. During the second year and afterward, they can recover the losses with the savings that come from mass production and with licensing fees from publishers.

However, Merrill Lynch Japan warns that the normal console business cycle may be disrupted if Microsoft cuts the Xbox 360's price when the PlayStation 3 launches. The report goes on to say that such a move could hurt Sony's plans, bringing an additional loss of 80 billion yen ($730 million) in its second year and 50 billion yen ($457 million) in its third year. Thus far, Sony has already invested 200 billion yen ($1.83 billion) into development and production for the Cell chip alone.

Toyo Keizai goes on to interview Sony Computer Entertainment president Ken Kutaragi, who avoided revealing the PS3's price but hinted that it would not be marked down excessively. "Whether consumers think a product is expensive or cheap all depends on the balance between its appeal and price," he said. "Our ideal [for the PS3] is for consumers to think to themselves, 'OK, I'll work more hours and buy it.' We want people to feel that they want it, no matter what."

"When Nintendo was selling its 16-bit machine at around 12,500 yen ($114), we sold the first PlayStation at 39,800 yen ($364)," continued Kutaragi. "The press was saying that it was expensive, but it was a huge hit. It's the same thing with the PlayStation Portable from last year. The Game Boy Advance is a same handheld gaming machine, and it costs less than 10 thousand yen ($91). On the other hand, our PSP had cost 25,000 yen ($229). But people lined up overnight to buy it, and it sold out on the day of its launch. It all depends on whether people want it. Of course, I'm confident that the PS3 is a product that people will definitely want."

52 Comments

  • Unholy_Terror

    Posted Dec 7, 2008 8:41 pm PT

    I'm not so sure why they're comparing the 16 bit SNES (I believe) to the 32 bit PSX. But they need to work on the production price down so they don't lose as much money...and can cut the price further...

  • Deepcut9

    Posted Nov 2, 2007 4:55 pm PT

    THE PRICE IS NOW 399! :_)

  • Kruegmeister

    Posted Aug 7, 2007 6:24 pm PT

    I hate the Background out of Focus Blurring.
    The 360 seems to do more of it. The PS3 has it too, but it seems more tamed down. I am not sure if it is a 360 vs PS3 thing or something the Developers have started to lighten up on. I have been buying more for my PS3 than for my 360 lately.

    I personally like to Check out things in the Background. But if it is out of Focus it looks like poop. I know it is more "Realistic" but how are you to know where I am currently Focusing???

  • jofy

    Posted Jul 26, 2007 3:25 am PT

    anhcodon770,you have absolutely no idea what youre talking about

  • slashs-tophat

    Posted Mar 23, 2007 1:07 am PT

    The Ps3 will be a huge seller...its going to be bigger than the ps2...Im a bit worried abouth the price to make vs.Retail price though...........could be fake mind you..lots of websites/different answers

  • Killerabc

    Posted Jan 1, 2007 7:10 am PT

    I Thought Both Systems had the Blue Ray system in it?

  • locketine

    Posted Sep 25, 2006 2:40 pm PT

    uh, motion blurring is a feature and requires more processing power to pull off... Some people don't like it, but it's not built into the 360 and it's up to the game maker to add it. If you don't believe me you can load up GTA3 or several other games that have the same effect and most of them will allow you to disable it and you will notice a huge difference in game performance.

  • rusty_13

    Posted Sep 22, 2006 8:45 pm PT

    why did he compared the psp with the game boy advance instead that comparing it with the ds?.....

  • ksa8907

    Posted Sep 17, 2006 9:20 pm PT

    i had originally thought that all these delays in releasing the PS3 would hurt its sales, but now that i think about it, by pushing the dates back Sony has separated itself from Microsoft in a way that may make some people feel as though the PS3 is a generation after the 360. haha, ok, i didnt intend for that to be a shot against Sony. but still, i dont have the money for a PS3, and probably wont have until the cost drops below $250 USD, but i would rather have a PS3 than a 360.

    the 360's graphics impressed me for about 10 minutes while playing COD2 in Wal-mart, then i realized the only reason that they can have the visual complexity at the frame-rate they run, is that as soon as the screen moves, everything gets blurred. blurry screens mean less demand on the memory and processor, which means higher frame rates.

    hopefully Sony will not do the same thing and make everything blur as soon as you move your head, i mean it kinda sucks when you scan an area for enemies and everything gets blurry, really takes away from the realism.

    its hard to argue for or against the PS3 seeing as it hasnt come out yet, so just as a little advice (if you can even call it that), dont start bashing it until you have seen what it can do.

  • madadi

    Posted Sep 14, 2006 4:17 am PT

    i think sony did a very good job on spending a little more time on development. that gave all the xbox 360 owners time to realize that their system is not that big of a deal, and soon you will see their xbox360s on Ebay because they want a ps3. Sony woudnt put themselves in the hole billions of dollors for a system that they dont think its going to be the next big thing. like the ps, ps2 and psp, sony hasnt disapointed us. i probably wont be in line at bestbuy, freezing, when the ps3 comes to the united states. but im definitaly going to buy it once a few more games come out for it that id be interested in. if sony can invest billions in their system, im sure i can invest 600 for some serious gaming fun, witch i know the ps3 will deliver and deliver goooooooood

  • jakeboudville

    Posted Aug 30, 2006 9:01 pm PT

    ..and it turn out to be much more expensive than that

  • kriz_91

    Posted Aug 19, 2006 12:05 pm PT

    [Deleted Triple Post]

    Sorry, it wasn't posting and then all of a sudden 3 posts appeared...

  • kriz_91

    Posted Aug 19, 2006 12:04 pm PT

    [Deleted Double Post]

  • kriz_91

    Posted Aug 19, 2006 12:03 pm PT

    [This message was deleted at the request of the original poster]

  • kriz_91

    Posted Aug 19, 2006 12:02 pm PT

    True, but that will also push a revolution in the market. Those who can't afford an HD TV now will be able to later on, Blue Ray disks will drop their price as they become more common and they replace regular CDs.

    Look at it this way, when the TV was first invented it was something only rich people could have. Then with the years better and cheaper models hit the market and soon everyone had a TV in their home.

    To those who talk about poor countries, I'm from a poor country. Yet I had bought even more games for my PS than I did for my PS2 which I got after I moved to US. In poor countries people sell bootlegged games for some $5 USD and the consoles themselves already come prepared to play the games as though they where original... My family was in the middle-low class but I never had much trouble buying a console or games for it.

  • slayaz

    Posted Aug 1, 2006 7:46 am PT

    I can't believe people are so ridiculously loyal!

    Why not wait and see what is best, then make a subjective decision, based on cost, quality and whether the games are gonna be any good or are anygood.

    A Blu Ray drive may be a bonus, but as yet no-one knows who is gonna win that battle, so it may turn into a betamax... And if you are too young to know what that means, then you are too young to debate on something that your parents are gonna have to buy.

    Sony will lose a lot of money over this, but the shocking way they seem prepeared to throw vast amounts away is cause for concern.

    It is US the consumer, that has to pay more money long term for them to recoup their vast losses. This is not only in the games sector but all aspects of consumer goods. Why would I pay $15 more for a film on bluray? or $600 extra on an lcd TV?

    They will get our money in the end.

  • britians

    Posted Aug 1, 2006 6:05 am PT

    The PS3 is gonna **** suck the microsoft company is what ill remain loyal too!!

  • Angarah

    Posted Jul 28, 2006 1:00 am PT

    Eurgh, Sony Fanboys, this'll take some doing

    "Yea. I am a big Sony supporter and i think its pretty clear the 360 wont surpass the ps3. It could be close but ps3 will be on top. The line up was real weak, the graphics wasnt much of a surprise in my opinion. The graphics arent anything you havent seen before, for example: Half-Life 2, Fear, Battlefield 2. If you compare the PC and the 360, the 360 doesnt really stand out when it comes to graphics, which is the whole point of a next generation system, to surprise the consumers and surpass current technology, graphics, and other aspects. 360 hasnt fulfilled it."

    Graphics of the 360 compared to PC aren't good? You need a very high-end, expensive computer to top the 360's graphics, which costs hundreds, if not thousands, of dollars more.

    Game line-up... lets see, Oblivion, Gears of War, GRAW, Dead Rising, Mass Effect, Splinter Cell, Saint's Row, Call of Duty 2... need i mention Halo? All geared to be instant classics (if they aren't already). Not very poor, is it?

    What it comes down to is that Xbox 360 will grab the casual gamer market. Thats it. You cannot debate that. It is cheaper and it has many games that appeal to that same group. Therefore it will succeed, unless the Wii pulls of an amazing reception

  • megamanx121

    Posted Jul 7, 2006 12:35 pm PT

    You see, it's good to hear that Sony is going to lose money for the PS3. It shows that they care about the customers and they want the customers to be satisfied. After all, just like the PS2, they'll get it all back anyways, right?
    Microsoft doesn't want to lose money and that's why the Xbox 360 is the crappy piece of s*** it is. Sony is a reliable company and I will buy the PS3 even if I have to sell my - Wait - Sell my PS2? I'm definently willing to do that!
    So anyways, you should get a PS3, all you people who are fantasizing about the Xbox 360 or the Wii. The PS3 will kick all competition's butts. Mwahaha.

  • yr7racer

    Posted Jun 23, 2006 6:58 pm PT

    By buying a PS3, you're getting a free Blu-ray DVD player! It's all worth it.

  • SanMiguelPare

    Posted Jun 17, 2006 8:07 pm PT

    Yea. I am a big Sony supporter and i think its pretty clear the 360 wont surpass the ps3. It could be close but ps3 will be on top. The line up was real weak, the graphics wasnt much of a surprise in my opinion. The graphics arent anything you havent seen before, for example: Half-Life 2, Fear, Battlefield 2. If you compare the PC and the 360, the 360 doesnt really stand out when it comes to graphics, which is the whole point of a next generation system, to surprise the consumers and surpass current technology, graphics, and other aspects. 360 hasnt fulfilled it.

  • WestSideAzn

    Posted May 9, 2006 8:00 pm PT

    Man. I believe that this piece of history will destory the 360. I know, I'm an Xbox 1 owner myself, but I have played the 360, and it hasn't really impressed me. The lineup of games aren't like "WOW!" They just... I don't know, I just don't see it as a surprising thing for me.

    The Xbox 360 hasn't shown it's true potential. If Microsoft could have spent just a LITTLE more time... possibly two months to bring up a notch.. then I suppose it would be a bit better. I like it and all, but I am now shifting all my focus to the Playstation 3.

  • call1

    Posted May 7, 2006 12:50 pm PT

    If you think of it , it could be cheaper, but Merrill Lynch is estimating the cost of the PS3 of its hardware componantes. They also could get a huge type of discount by buying the parts in bulk, and alot of People dont actually know the exact price of all the componates. By the time the PS3 come out some new type of low cost material or type of production machine may come out making it cheaper. By the way I read on some article that Sony invested billions or hundreds of millions of the PS3 and the highest they could price it would with people actually buying it would be 500$ before people lose intrest due to the high price. They also dont know what it could because people are saying thousands and numbers around 900 all the range is huge! When ther PSP came out everyone predicted it would be extrmely expenisive live 500$, but was 250$ with accesories. Finally after I've been rumbling on and on There is this article on engadget that says it going to 399$, so people dont worry there is no way it's going to get over 500 or Sony will have no buyers and I'm okay with 400.

    PS3 funds
    820

    Here's the link to the article

    http://www.engadget.com/2006/04/26/latest-ps3-pricing-and-release-news-early-november-for-399/

  • edgeofblade

    Posted Apr 29, 2006 11:14 am PT

    How convienient they forget how the DS is laying the smack down on PSP.

  • eddycanizales

    Posted Apr 29, 2006 9:17 am PT

    Look smart @$$!!!!! Doy you really think Halo 3 will sell that much in order to make people forget about games like Metal Gear Solid 4 or KillZone ???? jajajajajaja Come one dude!!!

    Halo is great and I own and X-box as well as a PS2........ But I'll tell ya something

    HALO IS NOT THE BEGINNING NOR THE END OF FPS

    I can't really tell why people get so crazy about Halo at all

    I mean.......sure it's a great game but.......Doom 3 and Half Life also are good as well and nobody get's that crazy

    Honestly the reazon why I bought an X-box is called Ninja Gaiden and I love it

    And that's the game Im looking forward to play on (the next gen X-box)

    Cause honestly so far it doesn't looks like a next gen system

    That Ghost Reccon looks like a mere upgrade from the original (nothing impressive at all)

    BUT HAVE YOU SEEN KILLZONE YET????

    GET BACK TO SCHOOL AND PLAY SOME FAMILY COMPUTER BEFORE TALKING

  • VanPL

    Posted Apr 29, 2006 8:21 am PT

    They will never tell you how much is it. I think that this is ordinary lie

  • tj4trax7

    Posted Apr 20, 2006 8:20 pm PT

    i REALLY want a ps3 when it comes out. i'm going to have to work at my dad's shop in order to make enough money to buy it. when i have enough, when it comes out, i hope to buy it off the internet (target.com, walmart.com, gamestop.com ect. (not some random google search result...)) lol

  • perfect_chao

    Posted Apr 19, 2006 2:36 am PT

    microsoft came out with something similar, yet all the sony fanboiz came here complaining that their really desperate.

    well look who's desperate now! and the fanboiz say the opposite.. meh

  • Imalex

    Posted Apr 17, 2006 5:02 pm PT

    I love Sony and I have bought both the PS and PS2 so i will definietly buy the PS3 even if i have to work for 2 summers to buy it. Plus the PS3 will hopefully have Ratchet and Clank 5.

  • 24hendrckfan48

    Posted Apr 17, 2006 4:38 pm PT

    i will buy it no matter what

  • ftothereaky

    Posted Apr 10, 2006 2:06 am PT

    The reason why the PS2 did so well was that it came out first. Now, PS3 hasn't done this. It won't do as well as the PS2. And regarding someone saynig how the Xbox 360 couldn't play PS1/PS2 games... of course not. If they did, Sony would have to give/sell them the rights: noone would do that in their right minds. The 360, can infact play Xbox games, a good feature. I've also no idea why anyone in their right mind would play a PS1 game on a PS3... I'm personally going to get either a Revolution or 360: the PS3's pad and... price seem to ridiculous. Also, in UK where I'm from, they always mark up. US release of PS2: $299. UK: £299. Thats over $500.

  • AsymiPhoenix

    Posted Apr 9, 2006 4:19 pm PT

    Well, this is certainly surprising. I was thinking that Sony was going to charge at least $499 for the PS3.

    Nevertheless, Sony has some serious catching up to do. Xbox 360 already has a good majority of gamers captivated, so they had better find themselves some good third party developers and debut with some smashing launch titles.

  • firebladedx

    Posted Mar 28, 2006 2:13 am PT

    Wow, i know there are a lot of people on here saying, for poor countries the PS3 is expensive, but hell im from the UK and it seems pricy for me...... im gonna wait and see what the Rev is like and whether or not the 360 will drop in price before all other consoles come out.

  • mitraj

    Posted Mar 19, 2006 7:16 am PT

    I Will get the PS3 even if a thousand dollars because Sony is a good and reliable company in the gaming indusrty and Xbox 360 game dont even look NEXT GENERATION only 2 games i have seen look next gen and those are comin out on PS3 sodont go waste money on the 360 Wait and spend a lil bit more but it will be worth it in the long run. And one more thing PS3 can play ps1 and ps2 games unlike the 360

  • excele01

    Posted Mar 8, 2006 1:06 pm PT

    Man, why's everyone hating? Anyway, Sony's eventually going to have yet another long line of good games once the PS3's been out for a while. After all, that's how it goes historically, if you look at all the consoles/game release patterns out there. And yeah, when the PS3 breaks out of its cage, the 360 will have an enormous advantage on the market due to the price cut and all. Cause come on, it's all gonna be good.

    But aside from all this, I can't wait to blow money for Sony.

  • anamnawshad

    Posted Feb 24, 2006 10:37 am PT

    Heck! I'm from a poor country (Bangladesh) but many people here have PS-2s' But I doubt how many will buy PS-3.

  • zim000

    Posted Feb 23, 2006 10:38 am PT

    ya ya ya ya ya ya ya ya i'm so happy it's going to be $399.99 i'm so going to get one ya oh ya oh yyaaaaaaaaaaaaaaaaaaaaa \,,/ o_o \,,/ (^_^) ($_$)

  • hanlector

    Posted Feb 22, 2006 10:09 pm PT

    I'm not rich but w/e price they put on the PS3 i'm gonna buy it.

    I been a huge Playstation Fan and there is no reason i should stop. I have a Xbox360 and I dont' even use it all that much, the game line-up is sad. I ike xbox but I'm gonna stick with PS3.

    I would hate to see SONY get hurt by this " I'll pay w/e price they put"

  • ll_jun10r_ll

    Posted Feb 22, 2006 6:37 pm PT

    Yeah what that guy said, i mean when the PS3 comes out, the 360 will have a price drop, so people will either get a 600 dollar machine,with a small lineup of games, or, they will buy a 350 dollar machine with a large line up of great games (PREY, Gears OF War, ), plus, lets not forget the most important thing, HALO, 1-3, i mean last time i checked, 2 was still the best game to play online

  • jqm1978

    Posted Feb 20, 2006 5:00 pm PT

    U guys are crazy to want to pay that much...oh and you guys that are hating on the 360 are doing so only because you waited too long to get one and cant get a hold of one now......360 will have a firm hold on the market by the time the phony drainstation 3 comes out...suckers

  • maalguy

    Posted Feb 20, 2006 4:40 pm PT

    $599.00 should be the price!

  • cibo4you

    Posted Feb 13, 2006 8:48 am PT

    Great $399 is a perfect price to pay for a next generation Playstation. At the price $399 they would recover their losses in one year look at the ps2.

  • GrayHalo

    Posted Feb 9, 2006 9:08 pm PT

    that may be true poweredbyzen but Microsoft also has many successful game designers and from the looks of this article http://www.ehomeupgrade.com/entry/2100/could_the_playstation
    Sony could lose a few to Microsoft for one reason or another, let alone suggestions from Sony's top developers (those making the next Solid Snake game) that the 360 is easier to develope for than ps3

  • poweredbyzen

    Posted Jan 28, 2006 2:07 pm PT

    a true game-fan will stop at nothing to obtain a piece of history! not rain, not snow, not hurricanes, and most certainly not a price tag. i dont care if the big-wigs at sony and microsoft duke it out, vying to get a big chunk of the game-market. just gimme my playstation! also, the console is nothing if you dont have games to truly bring out it's potential -- micro chips, processors, and all! we all know which company has strong relations with successful game developers -- sony!

  • SENoLimit

    Posted Jan 11, 2006 7:09 pm PT

    Yea... I'll get a PS3 even if it's going be price... I mean if I spent over 2500 cdn on my computer... I might as well get a $800 PS3... I won't care unless if it's over $1500 CDN... That'z when there is a decision...

  • ghasan74

    Posted Dec 27, 2005 2:34 pm PT

    I am willing to pay more for a PS3 rather than spending my money on a cheaper xbox360. I am an xbox owner, but the 360 hasn't impressed me so far, and whatever what microsoft says, it seems that its consol is based on todays technology in comparison with what the PS3 and the revolution are promising. I am in more anticipation for the PS3 and the Revolution, and I think I can wait until then to decide if I will by an Xbox360.

  • carlosmaggoo

    Posted Dec 27, 2005 11:35 am PT

    Man I'll go in debt to buy a PS3! I mean common you guys you charge stuff for your woman on your credit card... Why not for your self for a PS3?
    For the kids:
    Hey study harder and do chores so your parents KNOW not think but they'll then know that you deserve a PS3.
    For people that live in countries with the minimum wage lower than japan us and others.... :
    If you can't do it like me and move to another country that pays better,Just wait for a year and MAYBE it'll be priced off! I know it sounds painfull but that's what I sufferded a few years ago whan the PS came out....
    Just my 2 cents ,

  • akisokre

    Posted Dec 26, 2005 1:17 pm PT


    Why dont they think more about their customers in poorer countries - Balkan,...
    You know what is average salary in Croatia - 500 euros and PS3 price they say 400 euros!!!

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