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.

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