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[neptunes]

I remembering seeing this slide posted in a thread a while back, and it had me thinking.
When does hardware become profitable? more specifically, when does a company reouperate money spent on r&d and the cost of actually manufacturing their console?

I'd also like to know the current cost of manufacturing of each console (and handheld) on market and their respect profit margins.

Thanks

 

[bill0527]

When you find out the answer, email Microsoft.

 

[ninge]

when it cost less to make and distribute than the price you sell it at!

 

[HyperionX]

Nintendo: Immediately
Sony: Within 1 year
MS: Never

That basically sums it up.

 

[Mrbob]

So Sony has already paid off the PS2, PSP and PS3 fabs with the PS2 profit? That should help cut down some PS3 costs.

 

[Flo_Evans]

how much is 3000 oku yen? 300 million? or is that 3000 million?

 

[argon]

There are two answers:

The physical hardware may never become profitable in some cases, depending on the scale and cost of production and the amount and timing of price drops. Making profits on console hardware is a benefit usually reserved to the market leader (unless you're Nintendo) because other companies can't sell enough hardware to benefit from the economies of scale, and are constantly pressured to keep pricing competetive.

But the real profits come from software licensing fees, and that's why most consoles are sold at a loss. It's a razor/razorblade scenario. Attract a higher installed base, and at one point software sales will be sufficiently high that licensing fees will recoup costs.

What is this point? Well its a bit more complicated because it also depends on additional factors like licensing fees and tie ratios, but I'd guess that to recoup development costs 4-5 years into a console's lifespan and make a profit would take about 15-20 million consoles for an established brand name like Nintendo, but more than that (30-40 million) if you are breaking into the industry like Microsoft. I don't believe Microsoft expected to be wildly profitable this gen, merely to establish a foothold in the industry. Note: my numbers are just a guesstimate based on sales of previous consoles.

 

[Pimpbaa]

Nintendo: Immediately
Sony: Within 1 year
MS: Never

That basically sums it up.

Why do people always think whatever happens the previous generation is going to happen the next generation? MS actually built a video game console this time (and not just a PC jammed into a console case). If it weren't for the harddrive, the 360 probably would be cheaper to build than the ps3. MS handling manufacturing of key parts (rather than getting Nvidia manufacturing almost everything) will help them tremendously next gen.

 

[Aika'svyse]

 

[bycha]

U won't get this info )

Sony -- believed to be making money on PS2 hardware after first year of sales in US. Not much obviously. Don't think R&D for this gen was big. R&D on PSP believed to му $300 mln. Everything changes with next gen.
Nintendo -- believed to be making money on Cube from the start. With slight losses after $100 price.

How much it cost? I think PS2 cost around $100 right now. +%retailer = 150$ in retail and i little profit for Sony.

 

[ronito]

Day one baby.

 

[MasterOrion]

Retailers for the most part by consoles very close if not to cost.

 

[mrklaw]

how much is 3000 oku yen? 300 million? or is that 3000 million?

oku is 100m, so 3000 oku is 300 billion (300,000 million) yen, or about £1.5bn

 

[Tekky]

You must keep in mind that even after a console comes to market, there is continuous engineering work going on to reduce its cost. For instance, how many different versions of the PS or PS2 have been made? The main reason for each new instance is to reduce production costs.

Thus you can't just ask "How much does console Z cost to make?" You must also ask when, for the cost is a function of time.

Profit is also a function of time; production costs go down, but so do market prices.