Analyst: PS3 production costs dropped by 50% in a year

by Alexander Sliwinski { Jan 11th 2008 at 10:00PM }

Business Week spoke with Nikko Citigroup analyst Kota Ezawa who believes changes in the PlayStation 3 have dropped production costs from $800 to about $400 per unit. Although Sony may have cut production costs dramatically it's not all sunshine and lollipops, Ezawa expects the Sony games division to lose about $1.4 billion this fiscal year, which is still better than the $2.1 billion loss last year and he doesn't expect prosperity in the division until '09.

With production costs continuing to drop and signs that Sony may see Blu-ray succeed, consumers who held out on the PS3 may see benefits this year. If the cadre of American analysts is correct, there may be another PS3 price drop this year -- although this time it'll appear more a sign of growth than desperation.

[Via PS3 Fanboy]

Tags: analyst, business-week, drop, ezawa, price-cut, pricecut, ps3, reduce

Reader Comments (Page 1 of 2)

playwhutyalike (kinda digs Manhunt 2) @ Jan 11th 2008 10:07PM

Another price drop would be fan-fuckin-tastic. I think it's priced decent now, but shit, I'm all about saving money wherever I can.

FrankTheCrank @ Jan 11th 2008 10:45PM

There's no doubt PS3 will drop to $349 by XMAS..

If Sony lowers the hammer and drops it to $299....then all bets are off and Microsoft is really going to need to lay the pedal to the metal.

The 360, even with it's stellar library of titles, is wayyyyy overpriced. It's 2005 DVD technology, and don't get me started on the failure rate, which at Joystiq is at, what, 100%? Microsoft could easily cut the price of that system by $100, and probably will come Holiday08. With Jasper in the wings, hopefully they will deliver on a STABLE, cheaper costing system, that I for one, will finally buy.

playwhutyalike (kinda digs Manhunt 2) @ Jan 12th 2008 9:30AM

I will own one or the other when GTA comes out. Damn it the PS3 looks better everyday. Another thing I like about it is that it is quiet. Plus if they come out with the white model, shit, it's over for me. They also have a candy apple red case mod you can get for it.

I guess I still supported MS by getting Vista Premium.

DrXym @ Jan 12th 2008 9:45AM

The PS3 is amazing value for money when compared to the 360. The 360 Elite costs *more* than a PS3, and all it has to show for that is a larger HDD. In virtually every other respect it offers less. No Blu Ray, no wifi, no browser, no local movie playback, no free online. I think if Sony can match the price of the 360 they're going to have a very good year. I also expect that we'll see a model with more HDD capacity.

I also expect that Sony is going to launch a slim version this year. They've been agressively working on the motherboard size so it's only 60% of its original size. It wouldn't surprise me if we see a slim appear before Christmas. I think it would send sales through the roof in Japan, especially if it was timed with MGS4 appearing.

Zeus.:God @ Jan 12th 2008 8:06PM

But the PS3 that is cheaper than the Elite has a fraction of the hard drive space and absolutely no backwards compatibility.

morganfell @ Jan 12th 2008 9:39PM

Don't worry. Joystiq will ride to the rescue and manage to put a bad spin and snide comments on any piece of positive Sony news. I can't wait until they are eating every smartass remark they ever made.

coolforever4537 @ Jan 11th 2008 10:10PM

Who cares about the PS3 now that both the 40GB and 80GB will never be as good as the 60GB (unless Sony decides to actually listen to the fans for once but I HIGHLY doubt that'll happen)

I'm happy with my 60GB right now and I feel sorry for everyone who wants a 40GB.

fwacce @ Jan 11th 2008 11:03PM

I feel sorry for anyone who thinks their way is the only way.

License to ill @ Jan 11th 2008 11:30PM

The 40 gig works just fine for me, PS2 backwards compatible, I don't care about. Only two USB ports, not a issue since I can use the USB hub I got with my 360's rock band. And the multi card reader, again I use a
USB multi card reader so no loss here...

B1gC72 @ Jan 12th 2008 12:12AM

i have a 60GB but honestly the 40GB PS3 is not a bad deal like everybody keeps playing it up to be. the only thing you really miss is the PS2 BC. other than that you can upgrade it for next to nothing since it allows the use of alot of normal computer parts if you feel the need to. USB hub for extra USB ports and a USB Card Reader if you gotta use an SD card or Memory Stick etc. i mean you can even upgrade the HDD with ease. you really dont loose much by gettin the 40GB one unless you gotta have your PS2 games.

DrXym @ Jan 12th 2008 9:50AM

Who cares you say? People complained that the PS3 was too expensive. So Sony revamps the model and slashes the price by $200. It's too bad it doesn't have BC, but frankly if you didn't buy a 60Gb or 80Gb (both of which have very good BC), then that's your own tough luck. And yes the 80Gb model had very good BC.

Sony should have kept the BC if they could, but clearly they felt that people who cared about it have already bought a PS3, and those that don't care much more about price. So BC was chopped to save money. If it bothers you that much, keep your PS2.

Brymo @ Jan 11th 2008 10:11PM

Another price drop and I would pick it up.

For BluRay of course.

Arlen @ Jan 11th 2008 10:28PM

A price drop would be great, but the re-addition of backwards-compatibility would be even better.

Obie @ Jan 11th 2008 10:35PM

Hey make the PS3 $349 and then we're talkin'!

Nick the Hero of Canton @ Jan 11th 2008 10:38PM

Personally, I'd rather get a dedicated blu-ray player, but if I did get a PS3 for blu ray, I wouldn't get the cheap one - no HDMI

FK @ Jan 11th 2008 10:45PM

I guess I won the jackpot then since my cheap 400 dollar cheap PS3 has HDMI. Lucky me.. or not.

License to ill @ Jan 11th 2008 10:49PM

Um the cheaper 40 gig does have HDMI...

Djuan @ Jan 11th 2008 10:56PM

Actually, every model of the PS3 has HDMI. Even the 20GB had it. Blu-Ray requires it to output 1080p, so not having it would cripple the BR capabilities.

They're not crazy enough to do that.

Lekko @ Jan 11th 2008 11:41PM

You're thinking of another console who thought HDMI was dumb for a long time.

B1gC72 @ Jan 12th 2008 12:15AM

@ Lekko

you forgot the "ba-zing" lol

but yea, somebody doesnt know what they are talking about. all PS3's have HDMI.

BPM64 - The Second Attack! @ Jan 12th 2008 1:31AM

Sorry, pal, but you must be stuck in early 2006 where Sony thought no HDMI on one PS3 and two HDMI ports on the other was a good idea. EVERY model of PS3 has one HDMI port.

Nick the Hero of Canton @ Jan 12th 2008 5:31PM

Wow, I read my information wrong - don't have to be complete douches about it, just tell me I was wrong -_-

luxera @ Jan 11th 2008 10:42PM

Ok I already have a PS3 so I don't care. I just wanted to make sure that I truly DID see an ad for "In the Name Of The King" on this site.......are you serious?

Xelloss @ Jan 11th 2008 10:47PM

If the bring PS3 down for 300 and thats the top ver I will buy one. But I am still waiting for some really good games, mostly MGS4 and FFXIII. But now that Blu-Ray will be the winner It looks like my parents might buy a Blu-Ray player and the PS3 is a mighty fine deal.

Gun Barrier @ Jan 11th 2008 10:49PM

i wonder if early adopters of the PS3 get angry everytime the price is droped. Its been reduced by $200 already. ($100 for the better one)

simmcity @ Jan 11th 2008 10:57PM

Early adopters paid more, but in a sense they got a bit more. By more I mean better PS2 compatiblity.

You decide for yourself, if 100+$ is worth it for better PS2 compatibility.

hexoDAT64 @ Jan 11th 2008 10:56PM

Not me. More PS3's = More Willingness for Developers develop good games. My PS3 was well worth the $600 I paid

B1gC72 @ Jan 12th 2008 12:21AM

i paid $500 for my 60GB during the "clearance" and i dont regret it one bit. i had always said that $500 was my top entry price before they even announced the price from the start (yea i thought it would launch around $400-$450, boy was i wrong lol)

JakubK666 @ Jan 12th 2008 9:46AM

@simmcity

BC was something that Sony wouldn't shut their fucking pie-holes ever since PS3 was announced.

Don't call it an extra as every PS3 should have had one in first place. Sony is trying to learn how to screw people over from the best...aka MS.

I'm just wandering how many PS3's got returned this x-mas when all the parents and kids realised that PS3 hasn't got the promised BC.

PS:At least MS said from the beggining that not all games will work on 360.

DonWii @ Jan 11th 2008 10:52PM

By cutting half of its features...

redneckvampire @ Jan 11th 2008 11:21PM

I agree. The only reason I would ever have picked up a PS3 was to have access to the tons of cheap, used PS1 & PS2 games. I never bought either of those and was looking forward to the PS3's price getting affordable to be able to enjoy lots of good games on the cheap. Guess that'll never happen now.

el serpiente @ Jan 11th 2008 11:36PM

There's still backwards compatibility, numbskull, just not on the cheaper one.

B1gC72 @ Jan 12th 2008 12:29AM

all PS3's play PS1 games, the 40GB just doesnt play PS2 games. so yea you miss alot of titles on PS2 but you can still catch up on the PS1 games. or.....just a crazy thought here.....you could buy the on that does have PS2 BC.....but i understand how crazy of a concept that is to grasp.....

Jack @ Jan 12th 2008 9:34AM

What an idiot you really are.

By half it's features, do you mean a $15 PS2 chip, and a £5 USB port/Card reader assembly?

Of course, that would result in a 50% reduction in functionality, if it were a wii, but this a PS3 we are talking about, where every single one has Blu-ray, Cell, HDD, HDMI, RSX and so on..

redneckvampire @ Jan 13th 2008 3:24AM

Come on people. Actually take the time to read before you open your pie hole. I said that I look forward to the PS3 becoming more affordable so I can have access to PS1 & PS2 games on the cheap. I never had either. But the trend is as Sony made a more affordable model they took out PS2 support.
Gee, I didn't realize I could spend more money to get what I want. What a bunch of retards.

Liqideos @ Jan 11th 2008 11:23PM

@DonWii

Those precious features were mere luxury items that Sony built into the system to make a multimedia hub that could do it all(as long as you buy proprietary devices), and stand above the rest of the console markets. The luxuries brought the cost up, and everyone BAAWWW'd about the price being so high.

Sales suffered, price was the big complaint. Easy solution, rip out the expensive add-ons.

Don't blame anyone but the consumer for that one.

Also, being an early adopter (HDDVD...sigh), it comes with the territory. They don't call it the bleeding edge for nothing.

Losing true PS2 compatibility is no fun, in that Sony pioneered the feature and now casual consumers have pretty much come to expect the feature from a Playstation console.

It's got to be tough trying to market the console though. People are just about ready to adopt an optical HD format, but complain about not having six year old tech tacked on.

And the magic pricepoint for any console to truly take off is still $299. Either that or just make a bunch of party games slapped together by summer interns working with share ware design tools, and market your system towards your grandparents.

Oh yeah, and if you want to be constantly sold out Sony...just make like...five a month or so.

1)Terrible games...but a WIDE selection, of terrible games.
2)Never have a reasonable flow of inventory...just make up really high NPD data showing that your console is kicking everyones ass...who's going to look that up anyway?
3)Make sure to market towards baby boomers and stay at home mothers.
4)Oh...and f#&% the controller. Just say: "revolutionary", and, "innovative", every other sentence. Having an army of nostalgic fanboys to back up your cause helps too.

There you go Sony. Screw pricedrops. Screw blu rays. The real key to success is to completely alienate and abuse the core customer who supported your previous efforts.

Just make the PS2 case cuter and toss some six axis at it. At this point in the cycle, the terrible game selection should just about take care of itself.

I'm a genius.

Catprog @ Jan 11th 2008 11:51PM

I am assuming these points are about the wii

1)Terrible games...but a WIDE selection, of terrible games.

and a good selection of good games

zelda,metroid,galaxy,RE4,Z&W,GHIII,SPM,

2)Never have a reasonable flow of inventory...just make up really high NPD data showing that your console is kicking everyones ass...who's going to look that up anyway?

Nintendo has the highest manufacturing rate ever (consoles, not handhelds)

So your saying that nintendo pays NPD to make up data

3)Make sure to market towards baby boomers and stay at home mothers.

And this is a bad thing why?

4)Oh...and f#&% the controller. Just say: "revolutionary", and, "innovative", every other sentence. Having an army of nostalgic fanboys to back up your cause helps too.

Isn't this the sixaxis and eye of judgement

The real key to success is to completely alienate and abuse the core customer who supported your previous efforts.

Nintendo's core is those who enjoy Nintendo games and they have not been alienated.

6 of the top 10 nintendo games by salees last gen have already had sequels on the wii. (another 2 next year)

Or are you talking about cote gamers who didn't support nintendo last gen anyway?

Liqideos @ Jan 12th 2008 1:22AM

It's satire sir. Say what you will, if your telling me that you don't notice the myriad of absolutely terrible games that find their way onto the Wii, and ONLY the Wii, then I don't know what to tell you. I mean, if your fine with franchise sequels and ports of games from the Cube, that's fine. Most of the flagship franchises ran their course with me on the N64 and GameCube in the past decade. Slapping a new control scheme onto a game I've played before isn't revolutionizing anything in my world.

But hey, it's good for business. And just color me confused as to why people are demanding a price drop on a 500 dollar PS3, which Sony already loses money on, but will blindly throw 250 on a console, a console which Nintendo makes a very solid profit on.

Again, just another reason for me to consider the Wii as not designed with me in mind.

As for the NPD, I was having fun. I'm just skeptical to the sales numbers, when the Wii is well known to be in low supply when they show up to the retailers. I'm not crazy enough to suggest that game publishers pay off news outlets in order to report a high number.

http://www.gamespot.com/xbox360/action/kanelynchdeadmen/index.html

I have owned a Nintendo console at just about every stage of my life. I clearly remember getting my NES whe I turned 5. I remember wanting a Sega but being given an SNES when I was ten. I had an N64 in middle school and a Cube along with my PS2 in high school.

At no time did a baby boomer or stay at home mother offer to play some Super C or Smash with me. Therefore, to me anyway, Nintendo doesn't correlate to Metamucil and Rachel Ray. I can liken the same jaded reaction to my childhood when my local arcade closed down and in its place went a Lane Bryant.

Again, I suppose it's nothing terrible, but again, I don't like the direction it's headed.

And as for the core not supporting the GameCube, by that time I remember a lot of my friends already owning the DreamCast or the PS2. Hell, even the XBOX came out before the GameCube if I'm not mistaken. It was only about three days apart but still last to the party. And by that point, the Playstation brand had all but taken over.

E3 2000 was the show that MGS2 knocked everyones balls off, veering a lot of core support over to the Playstation side of the fence.

You could say that gamers didn't support Nintendo, or you could argue that Nintendo didn't support gamers. It's no secret that Nintendo had a reputation of being arrogant towards retailers, publishers etc. Nintendo hardware had always been more costly to license and develop, and I think a lot of developers saw a chance to just go with Sony hardware.

The way I see it, Nintendo blew it, lost a big part of the core, and now just cut the losses and find a new demographic who they can market to.

I think the Wii helps the industry in the long run, because it has brought a new type of gamer, and I guess buying two games a year makes them gamers now.

In summation, Sony could easily develop a Wii-esque console if they just modified the PS2, and rebranded it to the same crowd that digs the Wii. And no, I don't seriously suggest that Sony do this.

I need to invent a keyboard the evokes dry humor.

BPM64 - The Second Attack! @ Jan 12th 2008 1:48AM

@Liqideos:
If that's satire, then every Nintendo-hating, Sony-loving person here must be a comedic genius. Because, quite honestly, I can't tell the difference between this post any anything made by the "Sony Defense Force."

Does Wii have a large amount of crap games? Of course. That always happens to the market leader. You can't honestly tell me that NES, PS1, or PS2 had more good than bad games.
But, even so, it would appear as though the scales are even more unbalanced than before. And I think there are several reasons:
1) Serious developers shrugged off the Wii, thinking it wouldn't sell at all.
2) Development costs of 360 and PS3 compared to the Wii keep away the shovelware devs.
3) Several of Wii's shovelware titles are old PS2 shovelware ported over (ALL of those "Popcorn Arcade" games... ugh)

Has Nintendo alienated the core? Perhaps, and perhaps not. While they haven't made all the right decisions (particularly in regards to online), they still make games that would NOT appeal to the "casual" gamer: Metroid, Fire Emblem, Smash Bros., and Zelda for examples.

Sequels? I don't see why everyone gets such a hard-on for "OMG TEH ORIGINALS IP" There are HUNDREDS of new IPs every year. The shovelware "Anubis II" is an original IP (despite the name, there was no prequel), but who cares about that?
And even if the game is original and good, it doesn't guarantee success. Where's YOUR copy of Psychonauts, hmm?

Unfortunately, publishers do have to force their developers to work on established brands BECAUSE THEY SELL. Want more creative, original IPs? Buy more original games.

And, personally, I don't care if the brand is new or old. How good a game is has nothing to do with the characters in it. I'd rather play Mario Galaxy than Kane & Lynch, for example.

tl; dr version: You call that comedy?

morganfell @ Jan 12th 2008 10:26PM

You may not realize it but you damn well are a genius. That was dead on the money.

hvnlysoldr @ Jan 11th 2008 11:23PM

So wait a minute... That means no that's stretching to say if Sony waited until now to release the PS3 when it's finally cost less than to sell, to conclude that Sony would be in a better position as 360 would have had 2 years head start and 1 year behind Wii.

sheppy2.0 @ Jan 12th 2008 12:44PM

Maybe I misunderstood your comment or maybe the reply system is foobared.

Frankly, The cost being driven down is a product more of running the systems for a year as well as slight revisions. Without the benefit of that year and it's impact on reliant technology (the more you make something, the cheaper it gets to make it), we would still be looking at PS3 launching at a loss. Just MAYBE at $650 instead of $800.

But on the other hand, Sony is, quite frankly, incredibly fast at turning around that loss point. Took PSX less than a year, took PS2 less than a year, took PSP under six months. So seeing PS3 drop into this zone this quickly isn't all that suprising. I mean, sure, Sony is an all in one company but that has definate advantages as even the nVidia chips for PS3 are manufacturered at a Sony factory.

Liqideos @ Jan 11th 2008 11:41PM

Yes...you nailed it...the Cell Processor is indeed, SO POWERFUL, it outputs 1.2 gigawatts, propelling it through time and space, and altering it's NPD data to reflect higher sales than the 360.

There is no scientific explanation as to why it can't catch up to the Wii sales figures.

And secondly, how the hell does someone land a job as an industry analyst? I could pull educated guesses out of my ass too. Did Pachter just invent a job and somehow trick everyone into taking his word as future law?

But seriously...the PS3 kind of almost secures it's future positioning by default, now that Blu Ray has all but garnered industry wide exclusivity.

Which makes me wonder what format Microsoft will go with for their next console. I don't see enough bandwidth in the next five years that would enable pure digital distribution.

JakubK666 @ Jan 12th 2008 9:54AM

HD-DVD is dying so they don't have much choice.

They still have advantage of an add-on drive. If Blu-Ray failed, Sony would just be plain fucked.MS only has to start developing a Blu-Ray add-on for a 360 :)

horngreen @ Jan 11th 2008 11:42PM

With Sonys poor sales it does seem like it just launched. Even though Blu Ray seems to have won it is still only geared towards early adopters at this point. With DVRs being dropped into most homes as cable boxes it is only a matter of time before owning a physical copy of a movie is history. It happened to still photography it will happen to your film collection. Many say "I'll never buy a movie without a physical case to put in my collection". Yes you will, you'll do whatever the market tells you to. You're probably saying this while carrying around an MP3 player fool! People need to stop falling for these constant format changes. How much of your cash are you willing to drop on tech that chages and becomes obsolete in 3-5 years? This has only been going on for about 15 years but people seem more than happy to jump on the bandwagon everytime somebody says they have something new. If we stop falling for it they'll stop doing it. I would like to think that an HD DVR would be the end all but you watch. Within 15 years a "new and better" TV format will be invented and they will drag us through this again.

B1gC72 @ Jan 12th 2008 1:04AM

yea you have some good points. i guess everyone just wants to be on the cutting edge so they continue to buy into these constant changes. most new electronic stuff you buy is obsolete in a matter of months now with the speed that new technologies are developed. i say now that i wont buy movies without physical mediums but like you said, i havent bought a CD in years, yet im always up on the latest music. but saying that, i can download a CD in a couple minutes, it takes much longer for a high quality movie download. i think eventually we will probably treat movies like we treat music and pictures now but i think internet connections that fast is a decent ways off. at least to the point where it will be a viable option for the majority of consumers. we will probably go through another physical media cycle before that happens cause i dont think FiOs is the connection to do it.

Liqideos @ Jan 12th 2008 1:36AM

I have never purchased a digital song. I'd like to think that I will never be forced to either. A lot of bands still make vinyl versions of their albums for those who prefer that format, so I'd like to think that I will be allowed to continue buying physical discs at a physical store, and pay with physical money, to own my physical property. That's just how I roll. My alarm clock in the morning is: "Let's get physical."

Now, I could see future generations, those who have grown up where there first musical ownership experience is via ipod. Luckily we'll all be dead and won't be around to witness the last amount of soul sucked out of media. The first music purchase that resonates with me is buying the Tool Salival box set. And being forced to go into San Francisco to get it. And almost being hit by a trolley. That's not an experience that you would remember on a digital service.

It's digital music as standard today, and soylent green tomorrow.

Spoiler Alert: It's people!