Sony Planning to Not Lose Money with New PlayStation 4

When the PS3 launched in 2006, the price was considerably higher than it is today. Still, despite its $499 price tag, Sony lost money on each PS3 sold, and this continued up until 2010. However, the company isn't planning on a similar scenario with the PlayStation 4.

Eurogamer cites Sony CFO Masaru Kato as saying the company is not planning a 'major loss' for the PS4. Kato elaborated that the development of the PS3 required a lot of investments in R&D. The fact that the PS4 incorporates existing technology means less of an in-house investment this time around.

"Unlike PS3, we are not planning a major loss to be incurred with the launch of PS4," he's quoted as saying. "At the time we developed PS3, we made a lot of in-house investments to develop the chip, the Cell chip. Development of the chip saw the silicon processing and all the facilities invested by us ourselves. But this time, yes we have a team working on chip development, but we already have existing technology to incorporate and also product investment and all the facilities will now be invested by our partners, other foundries, so we don't have to make all the investment in-house."

Sony showed off the PS4 for the first time a few months ago. The company held a special event in February and talked at great length about the development of the PS4. Sony said that the PS4 has been in development for five years, which is a bit surprising as the PS4 seems to be based largely around existing PC technology. The console is based on x86 architecture with 8 cores, an integrated GPU, and 8GB of shared GDDR5 RAM. The graphical portion of the APU is said to deliver almost 2 TFLOPS of performance. Still, this goes hand in hand with what Kato was saying about not sinking huge amounts of money into developing chips and silicon processing.

While Sony offered plenty of information on the hardware, the company didn't actually show us the console itself. For that, we'll have to wait until E3, which isn't too far away. We also don't have any clue about pricing, which is obviously a very important factor for both consumers and Sony's bottom line.

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  • jamesjones_det
    Since they are just throwing PC hardware into a console it's not inconceivable to think they can keep costs down with this generation of consoles (sightly customized but it's an AMD off the shelf CPU/GPU at it's core).
    16
  • DRosencraft
    Two things; first, I think there is very clever parsing of words here. The CFO specifically says not a "major" loss. That means there is possibly still some kind of loss. Remember, the PS3 sold for $600 new at launch, and even at $500 it was still costing Sony money on each console. That means that cost was very, very high relative to the sale price. Even so, they are using relatively new technology in the PS4, so they will have some extra costs of R&D compared to using an off-the-shelf AMD A10 and Radeon HD 7xxx. They likely aren't going to sell the console at cost, trying to net some of the cost/gain profit while leaving room to drop prices later as cost of production comes down.
    Two, I think it would be better to have higher hardware costs as opposed to higher software costs. Ideally hardware price would be low and games would come down in price instead of go up. But there have been some quiet rumblings that game prices would be going up this generation in part to better subsidize the consoles. I rather pay an extra $50-$100 on the console than paying an extra $5-$10 per game over the life of that console. At only 2 games a year, in five years you've spent that same $50-$100 in extra costs per game, money that could have been better spent on another game.
    13
  • Other Comments
  • stevejnb
    Not sure how I feel about this. In previous generations, part of the whole console business model was to release fancy hardware and subsidize it, making up money through game sales. If they don't plan on losing money on their consoles, what does that mean for the relative quality of the hardware in the console? Nintendo made money on each Wii sold and, simply put, the hardware itself was garbage.
    4
  • itchyisvegeta
    It is very simple. They will base it around the price of Microsoft's new console, while factoring in the cost of developing and manufacturing the system.
    0
  • vmem
    hmm, to "not lose money" with your awesome new product... that somehow doesn't sound right form a marketing point of view
    -2