Sony breaking even on PS4 hardware costs

IHS teardown of new console puts Sony’s cost of goods and assembly at $381 per system.

Sony breaking even on PS4

The gaming industry is officially through the looking glass. Nintendo, a long-time advocate of turning a profit on its hardware, is selling every Wii U at a loss, while Sony is just about breaking even on the PlayStation 4.

According to an AllThingsD report, market research firm IHS has conducted a teardown of the PS4 and estimated Sony’s cost of parts plus assembly on the hardware to be $381, while the console itself retails for $399. That’s a far cry from the PS3’s launch economics, when IHS estimated Sony manufacturing cost for each machine at $805, far exceeding even the system’s already steep $599 retail price.

Most of Sony’s PS4 costs are accounted for by the system’s CPU and memory. The AMD chip at the heart of the system is estimated to run Sony about $100, while another $88 was attributed to 16 separate memory chips in the system. The Dual Shock 4 controller was pegged at an $18 build cost.

“If your cost is within $10 to $20 of the retail prices, there’s very little chance you’re making a profit on the console,” IHS analyst Andrew Rassweiler told the site.

The IHS estimate falls in line with comments Sony Computer Entertainment Worldwide Studios head Shuhei Yoshida made to GamesIndustry International prior to the PS4 launch last week.

“In a sense, we’re doing great because we’re not losing billions with the launch of PS4,” Yoshida said. “In fact, we’re pretty much breakeven in this launch year of PS4…”

Michael Denny Explains Why PS4 Games From Naughty Dog, Media Molecule & Naughty Dog Weren’t at gamescom


While Shuhei Yoshida, President of Sony Worldwide Studios, may get the most attention from that particular division of Sony, there’s also Michael Denny, Senior Vice President of Sony Worldwide Studios Europe, who chatted with PlayStation Access at gamescom.

Denny has previously talked about how there’s over 50 external developers as part of WWS, with all first-party developers making PS4 games, but some of those developers – Sony Santa Monica, Media Molecule, Naughty Dog – were absent from gamescom, something Michael explained:

We didn’t announce their titles, as you know. The reality is we’ve announced a lot of AAA blockbusters from first-party and third-party. I think the teams you talk about there, you will have noticed they’ve done some quite big games on PlayStation 3 recently, yeah? So, hence why their PlayStation 4 debuts will come a little later.

So it was that chance to look at  the other side of what PlayStation 4 can offer as well with some of those smaller, innovative titles as well.

The PlayStation 4 launches on November 15th in the USA and Canada, with many other countries getting it on November 29th.



Sony: “It’s not the decline of consoles, it’s the decline of a generation”

Shuhei Yoshida adamant consoles can still innovate in a world of pioneering mobile and business disruption.

Sony: It's not the decline of consoles, it's the decline of a generation

Console manufacturer Sony is convinced that home hardware can still innovate in the games business, rather than follow the lead of the disruptive technology and business models pioneered by mobile and free-to-play games companies.

“After you see sequels to the same three games people feel like they’ve seen everything before. That’s natural, but that’s nothing like the end of the consoles”

The console market has suffered decline particularly during the past three years, with a thinning out of big-box publishers like THQ and Midway, and the closure of successful development studios responsible for some of the best-loved franchises in the business.

Many commentators see this, along with plummeting retail sales, as the beginning of the end of the console business, as more developers move to mobile, PCs and tablets, shunning high game prices for free-to-play services, value for money bundles and app stores that offer distribution opportunities to millions of consumers.

But Shuhei Yoshida, president of Sony’s Worldwide development studios, has told GamesIndustry International that home consoles can still innovate in development and business, stating: “if we didn’t believe in that we wouldn’t be in this business.”

“It’s not the decline of consoles, it’s the decline of a generation,” he said. “This generation has been the longest on the PS3 and the Xbox, it’s the seventh year. In older times we would have launched a new system already. Really, developers hit the limits after a couple of games on the same system, typically.

“There are a few developers like Naughty Dog or Quantic Dream who are doing more, but that’s kind of the exception. After you see the sequels to the same three games people feel like they’ve seen everything before. That’s natural, but that’s nothing like the end of the consoles.”

While this generation has been much longer than previous, Sony is planning a 10-year lifecycle for the PlayStation 4, but it’s not concerned such a long time on the market will lead to console fatigue.

“If players are excited that means we are doing something right,” said Yoshida, referring to the companies triumphant showing at E3 earlier this month.

“It’s very simple. When you look at the PlayStation 3, it is way, way better than the PS3 that came out in 2007. Because we’re constantly improving and adding content and updates, through firmware or PSN updates. It’s the same with PS Vita with new applications added. It’s a constant evolution of the system even though the hardware remains exactly the same.

“It will be the same with the PlayStation 4,” offered Yoshida. “We are launching this holiday but we already have plans on the roadmap for additional features and improvements on the services side which will constantly evolve with time.

“The key to this on PS4 is we have a huge 8GB of memory. That’s way more than game developers need initially. At the mid-point of the PlayStation 3 lifecycle we really hit the limit of what we can add in terms of system features. The reason we couldn’t add cross-game voice chat that players wanted was we were out of memory. Because we have 8GB of RAM we can secure enough room for whatever great features developers can come up with.”

“If you’re a PS3 or a PS Vita user you can still enjoy cloud services. We’re developing along that schedule, not necessarily trying to tie in with the PlayStation 4 schedule”

If new services and updates are key to keeping the PlayStation 4 relevant for the coming decade, then the cloud gaming services that Sony is putting in place will be central to the console’s evolution.

However, cloud gaming services won’t be available at launch of the PlayStation 4 this Christmas, with Yoshida explaining that the technology developed by the Gaikai team is being integrated across the whole PlayStation ecosystem, not just the PS4.

“Cloud gaming services are launching next year in the US so PlayStation 4 and Vita users will be able to play PlayStation 3 catalogue games even though there’s no native compatibility on the system itself. That’s just one example of how we can improve the system.

“The PlayStation 4 is just one of the target devices. It’s all about the cloud server. Our team in Gaikai and Sony Japan are working hard to provide the online game services but it doesn’t require the PS4 to enjoy those services. If you’re a PS3 or a PS Vita user you can still enjoy the cloud services. So we’re developing along that schedule, not necessarily trying to tie in with the PlayStation 4 schedule.”



Sony: PS4 will play used games

Sony Worldwide Studios president Shuhei Yoshida has confirmed that the PlayStation 4 will play pre-owned games, despite earlier reports.

Shuhei Yoshida

“That’s the general expectation by consumers,” he explained, before confirming the capability to Eurogamer.

“They purchase physical form, they want to use it everywhere, right? So that’s my expectation.”

Eurogamer later heard from a separate Sony source that the patent that started rumours of second-hand games being blocked didn’t in fact relate to PS4.

Yoshida was less transparent on the European release date however. While the date is set for Christmas for the US and Japan, Europe has traditionally seen a later release for consoles.

“Europe is an enormously important market,” he said.

“That’s no question. So I hope European consumers can play PS4 as soon as it’s available somewhere, but I’m not making promises.”

PlayStation 3 launched in Europe a full four months after the US and Japan, and fans will be keen to hear reassurance the same delays won’t happen again.

“For one thing the system has to be complete and we have to understand the manufacturing pace of it. Then we have to kind of look at the demand predictions and we have to decide whether we can go global or like [the rumour]. So it takes more time for us to know that.”