PS3 now 70 per cent cheaper to make

By Ellie Gibson Published 31 July, 2009

How about that price cut, then?

The manufacturing costs of PlayStation 3 have dropped by 70 per cent, according to Sony CEO Nobuyuki Oneda.

He was speaking during a conference call, as reported by TVG.

"The cost reduction since we introduced the PS3 is very substantial and this is on schedule," Oneda told investors.

"We don't disclose how much of the PlayStation 3, specifically the cost deduction, was achieved during the past two years. But that is on schedule."

When pressed further on how much the cost has come down Oneda replied, "About 70 per cent, roughly speaking."

Sony's never said exactly how much it costs to make a PS3. However, back when the console launched estimates put the price of manufacturing each machine at $800 / £485. In January last year, reports indicated the cost had fallen by 50 per cent to reach $400 / £243.

GamesIndustry.biz's own Carol Vorderman calculates that a further 70 per cent drop would put the current cost at $240 / £146 per unit.

Could that mean a price cut is on the way? Or perhaps they could start giving them away for free?

Picture of Ellie.

About Ellie Gibson

Since joining Eurogamer in the mid 2000s, Ellie has written about subjects as diverse as the fall of Gizmondo, the rise of Hollyoaks actresses in Red Alert games and the noise a bear makes under NSFW circumstances.

Read more articles from Ellie by visiting the Ellie Gibson archive page.

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Comments (76) Latest comment 3 years ago

Comments for this article are now closed, but please feel free to continue chatting on the forum!

  • onezeonx #1 3 years ago

    Price cut for Xmas IMO

  • Vic #2 3 years ago

    Sony wont make big price cuts and eat into their profits like MS have. They want to boost their userbase obviously, but they've seen MS's sales increase, without the corresponding profits, and they've probably looked at that and thought, 'whats the point when we can keep selling for £280?'.
    Edited by Vic at 31/07/09 @ 11:57

  • Optyk #3 3 years ago

    It'd have to be a very large price cut for me to consider buying one.

  • KrissAkabusi #4 3 years ago

    Don't agree Vic. You can reduce the price and not eat into profits. It's just finding the sweet spot. Coming down from £280 to say £219 might be eye-grabbing enough to force sales up sharply, and still leaves them a huge margin if they are being produced at £146.

  • Toothball #5 3 years ago

    Well I was toying with the idea of buying a PS3 soon, but was apprehensive with all these rumours of a slim one. With talk like this there's no way I'm picking up one until something is confirmed. And I don't consider a Sony denial as confirmation of anything.

  • el_pollo_diablo #6 3 years ago

    In the cafe around the corner from me they sell a cup of tea for £1. I estimate it costs them about 4p to make.

    Interesting.

  • beastmaster #7 3 years ago

    I'm with Toothball on this one. I'm going to get one. Just not yet.

  • kangarootoo #8 3 years ago

    @KrissAkabusi

    Sony don't get to keep the difference between manufacturing costs and retail price you know.

    There are all sorts of other costs, and middlemen, hoovering up the difference. Same as any production business.

  • kangarootoo #9 3 years ago

    @el_pollo_diablo

    Rent, electricity,wages, insurance, advertising, equipment and stocking costs all mean that your cup of tea cost rather more to make than just the cost of a teabag.

  • KrissAkabusi #10 3 years ago

    @kangarootoo

    And what in my post suggests I wasn't aware of that?

    But if you think there's anywhere near £73 of hoovering up going up after production costs then you are being a bit silly.

  • el_pollo_diablo #11 3 years ago

    Plus the cost to the planet, let's not forget that.

    On second thought, fuck the planet.

  • Chufty #12 3 years ago

    After 2am you can get a teabag for around £15 around here.

  • skillian #13 3 years ago

    @el-pollo_diablo

    Worse is when they charge £1 for a medium cup of tea, £1.50 for a large. It's not like they use another teabag, they just top the cup up with water!

  • onezeonx #14 3 years ago

    Can't beat a good tea bag now and then ;)

  • Vanmunt #15 3 years ago

    Comes as no suprise it costs 70% less to make now as the new models do look really cheap and nasty compared to the origional 60gig... They now have a mat trym and a nasty noise when you insert the disc, less usb & backwards ps2.. always pays to buy first gen sony.

  • lavalant #16 3 years ago

    Worse is when they charge £1 for a medium cup of tea, £1.50 for a large. It's not like they use another teabag, they just top the cup up with water!

    Wait. Did you just compare the 360 to the PS3?

  • El-Dev #17 3 years ago

    This may be only the cost to produce one, as in to have it sitting at the end of the production line. Never mind the packaging costs, distribution etc.

    Who knows...

  • Whatsfor #18 3 years ago

    Well the retailers margin at £299 is about £22 so I guess the £199/£209/£219 mark would be fine. At £199 I think Sony would be relying on more games sales.

  • kangarootoo #19 3 years ago

    @KrissAkabusi

    Erm. Well, its this bit.

    "Coming down from £280 to say £219 might be eye-grabbing enough to force sales up sharply, and still leaves them a huge margin if they are being produced at £146."

    How can you declare a "huge margin" exists, if you don't know what other costs are involved?


    "But if you think there's anywhere near £73 of hoovering up going up after production costs then you are being a bit silly."

    Its probably nearer about half of that. Now if you know something that I don't how about you say so, or would you just prefer to call me silly again.

  • BritishBlue1 #20 3 years ago

    £146 per machine? Interesting, in that case they could easily afford slashing the price to £199 or there abouts. I think this would really help the PS3 since it needs the sales boost. That said, I don't think it'll be long now till they slash the price, it seems there's a lot of people out there just waiting for the price to come down.

  • Chufty #21 3 years ago

    We can make these arguments till all our faces are blue. Sony will spend a lot of money on market analysis and forecasting to make sure they are at the optimum price point.

    Believe it or not, Sony are an extremely successful business.

  • skillian #22 3 years ago

    Doesn't mean they won't make mistakes Chufty.

  • Vic #23 3 years ago

    @Kriss

    Sony are milking it, and I'm sure there'll be a price-cut fairly soon, but they dont want to drop too soon and leave themselves with nowhere to go like MS have.

    Maybe they'll wait till October and Uncharted 2/Demon Soul's/Tekken 6?
    Edited by Vic at 31/07/09 @ 13:01

  • moggsy #24 3 years ago

    @Chufty

    'Believe it or not, Sony are an extremely successful business.'

    You mean historically surely as they are certainly struggling at the moment?
    Edited by moggsy at 31/07/09 @ 16:17

  • Colin8703 #25 3 years ago

    When they work out what the cost is to make a console, all of the factors such as manufacture, packaging, etc are taken into that cost as well as pretty much everything else.

    It's ramped into what is called cogs (Cost Of Goods)

    Although as a side note, with the money that MS have spent on advertising and promotion, they could have just handed out xbox 360's for free and actually saved money.





  • makeamazing #26 3 years ago

    I have no doubt there will be a price cut, but they wont cut it as much as they potentially could by this report... they have to make a profit, but also leave room for future price cuts in the future. Better to drop £50 off it and see how it goes and then still have room in the future to cut it some more. This is where MS have more of a problem (well not on the Elite but on the arcades especially) they dont have alot of room to move.

    wonder if the 70% is based on the new slimline or the current model?

  • des #27 3 years ago

    Good,now they can start giving it for free.
    Free PS3s for everyone...

  • JahB #28 3 years ago

    on the 24th of September, Kaz Hirai will announce the PS3 price cut during his TGS speech. all these "news" stories are just to build up the hype.

  • drewman5150 #29 3 years ago

    How do they justify charging 50p more for a large tea? A top tip would be to carry a thermos flask with you containing nothing but hot water...then...ask for a medium tea in a large mug, and top it up with the hot water from your flask.
    After a large number of tea's like this, you would save a fortune, probably enough to buy a bigger flask.

  • beastmaster #30 3 years ago

    @JahB

    would be great. But I always expect such announcements to be followed by

    ... But not in UK

  • JahB #31 3 years ago

    @Beastmaster

    i'll guarantee you it will include the UK, simply because it's the largest gaming market in europe; a ps3 price cut for the holidays will provide sony with quite a nice global sales bump, which is what they'll be looking to achieve.

  • carlitoswagon #32 3 years ago

    Maybe the savings on production cost could be invested into making a gamers remote that doesn't suck balls. Something like the 360 remote would be nice!!

  • WinterSnowblind #33 3 years ago

    A price cut would definitely help sales, I still no loads of people who would buy one if it were just a little cheaper.

    It definitely won't "finish" Nintendo and Microsoft, if the console was really *that* much better, being slightly more expensive wouldn't stop anyone from getting it.

  • Luvbeers #34 3 years ago

    Microsoft is a software company. With an attach rate like the 360, the hardware is there more as software support than as a profit engineer.

  • AusFreelancer #35 3 years ago

    Judging by the 360 price cut here in Aus (arcade down $50 to $250), i'd say it'a about right, and about time for a price slashing - not holding my breath for a big one.

    Also its VERY hard to find a PS3 in the shops here, with stocks expected end of August/September. I smell a new model....

  • El-Dev #36 3 years ago

    "It's over, Microsoft and Nintendo are FINISHED."

    "I think you'll find they are American and Japanese, respectively."

    Say what?

    I actually don't get why the MS and Nintendo statement was answered with, "no they are American and Japanese".
    Edited by El-Dev at 31/07/09 @ 14:04

  • KrissAkabusi #37 3 years ago

    @kangaroo

    But again, there's nothing in my initial quote that implies that I believed Sony were taking every penny is there? So why respond with this? "Sony don't get to keep the difference between manufacturing costs and retail price you know.......etc"

    You then post that you believe those other costs would be 50 percent of the "difference". So continuing on your line, that'd still be £36.50 clear profit for Sony on every machine. Whether it's huge or not is wholly subjective to where you are sitting, but they were losing money on machines before. Now that they are not, if a price cut looks like it would lift sales to the point where taking the smaller profit margin is worthwhile, then it's obviously wiser to go for it and get the install base rising.

    I'm not Sony's financial advisor, but you can't seriously imply that Sony have little scope to maneuver for a price cut when faced with the figures in this report.

  • Petulant_Radish #38 3 years ago

    I'm a love rod, touch me.

  • TheStatics #39 3 years ago

    Economic advice to Sony on an internet forum = total hilarity.

    Seriously chaps, they have people for this sort of thing... if you were capable to supply them with the information they needed you wouldn't be sitting on a computer game forum discussing it!

  • ps3owner #40 3 years ago

    hm. original price $800/£485 with a 50% price cut is $400/£243 respectively. Another 70% price cut based on the now £243 figure would suggest a current cost of £73 per unit, not £146 ...

    edit: I was shit at math btw, so no idea if my figure is right ;). but I do know that it can't be 146, even 50% of £243 is less than £146...
    Edited by ps3owner at 31/07/09 @ 14:26

  • El-Dev #41 3 years ago

    Farticus,

    Ah Finnish sounds like finished. I see.

  • TheStatics #42 3 years ago

    @ps3owner - I'm pretty sure it's a 70% reduction from the original costs.

  • ps3owner #43 3 years ago

    ok, then the article is missleading:

    GamesIndustry.biz's own Carol Vorderman calculates that a further 70 per cent drop would put the current cost at $240 / £146 per unit.

  • rprince #44 3 years ago

    This is a little badly worded. What the comments seem to indicate is that there has been a 70% reduction from the original cost. It is *not* "a further 70 per cent drop" after the 50% drop.

    It'll be interesting if they'll try to increase the userbase with a price cut, or whether due to the recession they'll prefer to make some money on each console unit (as Nintendo do).

  • El-Dev #45 3 years ago

    ejikeanyanwu, did you read the article?

  • Dizzy #46 3 years ago

    "Seriously chaps, they have people for this sort of thing... if you were capable to supply them with the information they needed you wouldn't be sitting on a computer game forum discussing it! "

    Yea of course... we are all bums here with no jobs. NOBODY here is actually employed or has an IT/Economics/science degree/.... Our opinions are totally irrelevant since we sleep in a cardboard box under a bridge while stealing local WiFi and posting on EG.

  • mingster #47 3 years ago

    Lol the people supplying them with the information to make their 'informed' decisions are the ones sleeping in little boxes in japan.
    They have no more idea of what to do then has our collective hive mind.

  • dubdivision #48 3 years ago

    Just think if apple made a full on game console, they would probably charge around £1000 and millions of suckers would actually pay up.

  • Spooke #49 3 years ago

    If I were Sony I would sell the current model of PS3 for £99 to clear all the stock and then introduce the Slim for £149.

    I was talking to a guy from Amazon and was saying that when a £99 branded Blue Ray player came on the market the uptake would be massive. Would seem to me to be a win-win, people who've waited for a cheap player and people thinking of getting a £129 xbox would be swept up on one fell swoop.

    Whether they can afford that kind of give away is a different matter of course.

  • RexRunti #50 3 years ago

    One thing to bare in mind is that whilst it 70% less Yen to make a PS3 than it did at launch, it doesn't mean the same drop in pounds, euros and dollars.

    As an example say at launch it cost £485 to manufacture a PS3, that's 109125 yen using an exchage rate of 225 yen to the pound for 11/11/2006. A 70% drop in costs means 32738 yen to manufacture, however with an exchange rate of only 158 yen to the pound (for today) that's £207, or a price drop of 57%, still significant, but does rule out the sub £200 PS3 for a while.

  • BritishBlue1 #51 3 years ago

    At the end of the day, if Sony want to significantly increase sales then £100 is the bare minimum they need to drop to. If this article is true then they certainly have the scope to do that...

  • Spooke #52 3 years ago

    loving Rexi's maths Skillz.

  • septimus #53 3 years ago

    It may cost them just £146 to make one, but with shipping, channel payments, reseller payments etc etc, don't expect to see one for less than £220. Still resellers might be nice and take a hit. 200-210 is possible.

  • ejikeanyanwu #54 3 years ago

    remember that Sony have a history of charging expensively for their products e.g. Bravia, VAIO etc.
    So even with this drop in manufacturing costs, if they DO decide to drop the price, it's likely that it'll still be reasonably high, and indefinitely higher than a 360 (rolls eyes), especially considering the current economic climate, along with the fact that "PlayStation" sales are down "down 37.4 per cent year-on-year" as stated in a previous article..

  • Rev.StuartCampbell #55 3 years ago

    "Economic advice to Sony on an internet forum = total hilarity.
    Seriously chaps, they have people for this sort of thing..."

    And how's that working out for them these days?

  • penhalion #56 3 years ago

    Actually doesn't this mean that they are still making a loss or at most breaking even on each PS3 they make? After all they don't get 299 for each unit sold, they get about half that. The other half is the retailers cut isn't it.

    So this is good news for Sony but, I doubt they can actually afford to cut the price yet.

  • malexous #57 3 years ago

    @ps3owner

    "GamesIndustry.biz's own Carol Vorderman calculates that a further 70 per cent drop would put the current cost at $240 / £146 per unit. "

    The sentence doesn't make sense/is confusing/is misleading.

  • ps3owner #58 3 years ago

    how about this...

    GamesIndustry.biz's own Carol Vorderman calculates that a 70 per cent drop would put the current cost at $240 / £146 per unit.

  • bdaggers #59 3 years ago

    My interest in PS3 has dropped by roughly 99.8% since its launch.

    Chances of buying one remain minimal at best.

  • bioreit #60 3 years ago

    @Penhalion

    "Actually doesn't this mean that they are still making a loss or at most breaking even on each PS3 they make? After all they don't get 299 for each unit sold, they get about half that. The other half is the retailers cut isn't it.

    So this is good news for Sony but, I doubt they can actually afford to cut the price yet.     "

    Retailers get nothing like 50% of a console's RRP - from my hazy days of standing around in Wizbit Games chatting to staff, it's always been somewhere between 5-15%, because:

    1) Console manufacturers have historically made a loss on hardware, from launch to quite a ways into the life-cycle, so the initial RRP is actually below the price of the hardware - manufacturers aren't going to gift half the RRP to retailers when they could nab half of that percentage and reduce their losses. But retailers obviously need to make some profit, so the manufacturers give them a low-ish percentage as an incentive.*

    2) There aren't just manufacturers and retailers taking a slice of the pie - there are distributors, couriers, international hauliers (different, I swears!), royalty payments to external R & D companies (Toshiba, NVidia, the DVD Forum, etc), so if the retailers get 50%, manufacturers will get far less. That would be an almost impossible thing to swing past senior management and investors:

    Company Guy: "Right, so we've got this new product that we want to sell and it costs X and we sell it for Y"

    Senior Manager/Investor: "How much does everyone get of Y?"

    CG: "Well, everyone else gets 85-90%, we get the rest."

    SM/I: "So, let me get this straight - we make this product and bear the brunt of most of the costs, yet we get by far the smallest return on our huge investment?"

    CG: "Pretty much, yeah."

    SM/I: "Release the hounds."

    *Which is also why you very rarely see retailers get into a price-war based purely on hardware prices, but on bundled games and accessories - their margins on those items are correspondingly higher, so they have more room for competition.

    Edit 1: Dagnammit. Can do all kinds of fancy emboldening and italicising first time out, yet apparently can't spell 'bundled'.
    Edited by bioreit at 31/07/09 @ 18:48

  • busboy33 #61 3 years ago

    @Vanmunt:

    " always pays to buy first gen sony."

    A few million people with 1st-run PS2s would like a word with you outside.

  • Arwin #62 3 years ago

    I'm going to make a guess that the pricecut will be announced on the 18th of August, probably along with the Slim. But we'll see.

  • cyber_nicco #63 3 years ago

    "When pressed further on how much the cost has come down Oneda replied, "About 70 per cent, roughly speaking."

    Sony's never said exactly how much it costs to make a PS3. However, back when the console launched estimates put the price of manufacturing each machine at $800 / £485. In January last year, reports indicated the cost had fallen by 50 per cent to reach $400 / £243.

    GamesIndustry.biz's own Carol Vorderman calculates that a further 70 per cent drop would put the current cost at $240 / £146 per unit. "

    Where the hell did he say "After an initial 50% drop in cost, the cost has come down an additional 70%." I don't know what the facts are, but all it seemed he was saying is that it's come down 70% overall. Just seems odd to assume that the 70% he quoted was relative to some estimate made in January last year. Maybe some part of the quotes are missing...

  • ForburyLion #64 3 years ago

    Is Microsoft Tea better than Sony Tea?

  • dominalien #65 3 years ago

    One thing to bare in mind is that whilst it 70% less Yen to make a PS3 than it did at launch, it doesn't mean the same drop in pounds, euros and dollars.

    I tried baring this in my mind. I didn't like it. I then bared Jessica Alba in my mind. I liked that a lot.

    :-P

  • shotgun44 #66 3 years ago

    I haven't read any comments but I bet they are all from whinging tools.

  • MiniAmin #67 3 years ago

    PS3 is tempting and I would definitely buy one if it was cheaper.

    Actually I'm not sure. The PS2 is still fantastic: it can play all my DVDs, it is very cheap, and it has a number of great (cheap) games which I haven't played yet. I'm guessing that PS2 is still profitable, and it's still selling like hot cakes. I wonder how much this affects Sony's pricing strategy on the PS3...

  • El-Dev #68 3 years ago

    "@Vanmunt:

    " always pays to buy first gen sony."

    A few million people with 1st-run PS2s would like a word with you outside. "


    My first PS2, launch model, lasted 2 days.

  • electrolite #69 3 years ago

    I think they've just worded it wrong.

    70% off £485 = £145.50

    70% of £243 = £79.90


    Either way, cut the price for pity's sake. Back in the PS1 generation Sony's smart, quick-thinking business practices and marketing were a breath of fresh air, now they seem like a lumbering, stagnant dinosaur. Being out-marketed by Nintendo is unbelievable.

  • knightmt #70 3 years ago

    This is the cost of making the current version. A slimline could be less, due to different product sourcing, design and build costs. Why are people asking for a 100 this is a bizare sum(why not 5 potatoes), it is all relevant to what they think it is worth, and it will probably be a third more than the PSP?
    To be fare I am massively impressed that the 360 has an insane price, but these two companies have different policies.
    But I am still under the illusion that you get what you pay for?

  • GreyBeard #71 3 years ago

    The "Slim" or however they choose to call the new cheaper-to-manufacture PS3, will basically get treated like a new product launch.
    Its a replacement for existing stocks, so once its announced it'll be open-season on dumping the old-hardware at retail. This is why Sony have been so secretive about it - any old PS3 left in the retail distribution chain at the time the new SKU gets announced will not be salesworthy at its current price. It'll be dead stock.

    It'll get anounced at Gamescon because realistically the European market is where Sony needs to start gaining traction. The US is a hard sell because its 360's strongest territory, and in Japan the situation is reversed because MS have still not reached a competitive level despite their best efforts and so the exclusive launch of FF13 at the end of the year should cement their position regardless.

  • Spekingur #72 3 years ago

    Seeing how Kaz Hirai has often been so good with winning the public over with his speeches (yes, that was sarcasm) he might be just as likely to announce a price rise.

    But only in £. They will drop the price in €. Because they can.

  • ILOVEU #73 3 years ago

    Sony's arrogance is unbelievable and I'm saying that as a PS3 owner. Last time I looked this machine was getting its butt kicked on sales by practically everything, hell even the PS2 is outselling it in some countries. Infact if they aren't careful they could end up with its this gens Sega Saturn. BRING THE PRICE DOWN NUMPTIES!!!

  • Teamallstar #74 3 years ago

    70% reduction in manufacture cost?

    70% reduction in features?

    0% reduction in price... Sounds about right for $ony!

  • Bulbatron #75 3 years ago

    Return full PSone and PlayStation 2 backwards compatibility, and I'll buy one. Until then, I'm more than happy with what I've got.

  • dominalien #76 3 years ago

    Return full PSone and PlayStation 2 backwards compatibility

    What's wrong with the PS3's PS1 compatibility?

    But yeah, it'd be great if we had PS2 compat back.