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Sony Planning to Not Lose Money with New PlayStation 4

By - Source: Eurogamer | B 33 comments

The next generation of PlayStation is due out later this year.

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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Top Comments
  • 16 Hide
    jamesjones_det , May 10, 2013 11:45 AM
    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).
  • 13 Hide
    DRosencraft , May 10, 2013 11:46 AM
    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.
Other Comments
  • 4 Hide
    stevejnb , May 10, 2013 11:05 AM
    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.
  • Display all 33 comments.
  • 0 Hide
    itchyisvegeta , May 10, 2013 11:08 AM
    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.
  • -2 Hide
    vmem , May 10, 2013 11:18 AM
    hmm, to "not lose money" with your awesome new product... that somehow doesn't sound right form a marketing point of view
  • 3 Hide
    makaveli316 , May 10, 2013 11:37 AM
    In other words "we want more money from you".
  • 16 Hide
    jamesjones_det , May 10, 2013 11:45 AM
    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).
  • -1 Hide
    rolli59 , May 10, 2013 11:45 AM
    Great they will make money of both the console and games.
  • 13 Hide
    DRosencraft , May 10, 2013 11:46 AM
    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.
  • -4 Hide
    stevejnb , May 10, 2013 11:50 AM
    Quote:
    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).


    MS was using PC hardware the last two gens and still lost money on each console out of the gate. The model was "release a console at a loss and make it up n the games" - giving consoles fairly impressive hardware out the gate and giving devs more to play with.

    If this philosophy has changed to "Save money on the hardware, release the console at a gain," does anyone lose but the customers? The Wii did exactly that last gen, sold on a novelty, and it was recognized as a technical backwater for the whole generation. Don't get me wrong, it had some great games, but it's a pity the developers didn't have more freedom with the hardware than they had with it.

    I've been console gaming since the NES. PC gaming as well, but that is beside the point. If in this generation console manufacturers not only use PC hardware but also release at a gain I am *finally* forced to ask the question - why not just PC game?
  • 6 Hide
    stevejnb , May 10, 2013 11:54 AM
    Quote:
    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.


    Whoa, you are right. I did read the article, but more just skimmed it... That headline is outright inaccurate. The CEO does NOT say that Sony is not planning to lose money on the console, as the headline of the article suggests.

    Bad journalism much Tom's? Shame to say, but I'm a perfect example of why this is bad journalism... Polarizing and inaccurate headline + just skim the article = inappropriate reaction. If the writer of the article is reading this, do you have any explanation why the headline is outright inaccurate?
  • 1 Hide
    dalethepcman , May 10, 2013 11:58 AM
    Hehe, I guess its better than "Sony prepares to go bankrupt upon the release of the PS4"
  • 3 Hide
    Murissokah , May 10, 2013 12:10 PM
    SONY has been going through a major management change for the last couple years. They are focusing in what they do well (Digital imaging, consoles and mobiles) to try and get back into the game. They were fighting too many fronts and losing on most of them.
    I am really optimistic about this new paradigm in the company, as a long time consumer. Some improvements can already be seen, in the mobile front for instance. Older Xperia phones were laughable in comparison to Samsung, but they are catching up rather quickly. I perceive Sony's design as much bether than the competition, and they finally have decent mobile hardware too.
    The console market shall not be different. They will not go for an extremely ambitious and economically risky move as they did with the PS3. The PS4 will be a simpler design with high end components (for a console, PC is not the competition here), a safer move that allows them to focus on what they are great at, which is product design.
  • 0 Hide
    bustapr , May 10, 2013 12:21 PM
    @stevejnb, it means they didnt invest too much into making the ps4 apu. most of the investment was made by AMD who created and developed the apu with their own existing tech. amd made the apu to sonys specs and sony incorporated whatever propietary stuff they needed into it. compared to the investment in the cell processor(which was quite the accomplishment) this apu investment is not much. the ps4 hardware is also cheaper to make due to the nature of the apu. all this translates into a much better profit margin than the negative ??% the ps3 had.
    I personally have never had an amd cpu fail on me. an old athlonx2 build I got in 2006 is still kicking it at my moms house. and my llano apu latop I got 2 years ago never really gave me any problems. so I wouldnt worry myself too much over console failure. its just my experience though, I wouldnt vouch for anyone elses experience with amd.
  • 0 Hide
    fulle , May 10, 2013 12:55 PM
    In how I understood it, the CFO was saying that Sony's R&D costs were less "major" with the PS4's development, so that the initial hit from investment costs are going to be less sever for the company.
    He didn't say anything about whether or not Sony was going to take a loss on individual PS4 hardware sales. He was talking about R&D investment costs.
    Let's not take things out of context, eh?
  • 3 Hide
    InvalidError , May 10, 2013 1:18 PM
    Quote:
    Remember, the PS3 sold for $600 new at launch, and even at $500 it was still costing Sony money on each console.

    But the PS3 used an almost completely custom CPU and Sony invested a lot in IBM to make the chips that never sold much anywhere else. So Sony ended up with the bulk of the R&D and production cost on top of having to develop Cell-specific development tools, libraries, APIs, etc. and re-train programmers to make proper use of the whole non-uniform non-standard processing monstrosity. The DMA glitch between the CPU and SPUs that severely crippled read bandwidth made an already unusual chip that much harder to deal with.

    With the PS4, the CPU cores are borrowed from AMD's mobile CPU line. The GPU and DRAM controller are borrowed from desktop GPUs, glue logic between the two is borrowed from APUs, manufacturing will be outsourced to the usual suspects so all major components are practically off-the-shelf. The only PS4-specific R&D is integration of Sony's proprietary extras; everything else is stuff AMD has already been and will continue doing for themselves.

    Modifying existing designs that are already designed to be scaled up/down with an existing library of support components for APUs, DRAM interfaces, DMA engines, etc. is much cheaper than doing everything almost from scratch as was the case with Sony's Cell. No need to re-invent software development tools either since most of them already exist, can be reused almost as-is and are already known by developers.
  • 0 Hide
    hotice , May 10, 2013 1:24 PM
    At release the PS3 was actually $599 USD for the high end (60GB) model. I know because I bought one at that price.
  • 3 Hide
    Bloob , May 10, 2013 1:34 PM
    Stand-alone bluray players were more expensive than the PS3 at the time of it's release. Now you can find a decent one for $60, I'm guessing Sony will save tons there too.
  • -3 Hide
    internetlad , May 10, 2013 1:59 PM
    FIVE HUNDRED AND NINTETY NINE U.S. DOLLARS.
  • 0 Hide
    kartu , May 10, 2013 2:32 PM
    Missing the point you are.
    PS3 hardware doesn't cost much.
    It's R&D that made it so expensive.
    With AMD's APU Sony doesn't need to invest into R&D of "fancy hardware". Console hardware is nearly identical to PC's. Easier to port, easier to develop for. Good for developers, good for consumers.
  • -5 Hide
    Anonymous , May 10, 2013 2:43 PM
    Translation we will dumb down the PS4 and cut corners to save money with 18 month old pc hardware thrown in with cheap black plastic case to mold around it and hope it will sell millions. I'll stick with my current gen PC gaming rig that already outshines the "next gen consoles" thanks.
  • 1 Hide
    bustapr , May 10, 2013 2:54 PM
    @stevejnb, your mixing some things that dont necessarily relate to each other. the fact that they are using pc components, not investing a whole lot in R&D, and making a gain doesnt mean at all that it will be bad or cheaped out. it means they are using already available tech and improving upon it. the apu itself from 1 supplier is already MUCH cheaper to make than a cpu and gpu from different suppliers. the savings and benefits are outrageous when compared to the ps3 disaster.
    consoles dont have to sell at loss to be good or anything. the wii was old tech right at launch, which provided a gain for every console sold. the ps4 is different in that its using new tech on the affordable process that is the apu. if they had gone the way of the ps3, they would have gotten to the exact spot they are in current ps4 performance, with all the problems of the cell, all the money lost in r&D, and a higher price tag.
    your comment about it "using pc components, why not just pc game" is kind of off too. this may be using pc components, but its still the exact same thing as the ps3 when compared to a pc. the pc is its own thing and the console is a totally different thing with the same architecture.
    xbox also did NOT use full pc hardware last 2 gens. theyve always done powerpc.
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