Sony might break even on PlayStation 3 next year

Costs for videogame console down 35% from 2007

By Danny King -- Video Business, 12/31/2008

DEC. 31 | Sony might trail Nintendo and Microsoft in the videogame console war, but it appears to be winning its own battle with product costs.

Sony's PlayStation 3 component costs were about $450 as of October, down 35% from the first-generation version of the games console a year earlier, research firm iSuppli said in a report this week. Sony cut costs by reducing the number of individual parts in the console by 30%.

"With iSuppli's estimated PS3 cost at $448.73, the product retailing in the U.S. at around $399 and taking into account other expenses, the PS3 may be able to break even in 2009 with further hardware revisions," said Andrew Rassweiler, director and principal analyst at iSuppli.

With a higher price tag than both Nintendo's Wii and Microsoft's Xbox 360 consoles, which sell for about $250 and $300, respectively, the PlayStation 3, which includes a Blu-ray Disc player, has consistently trailed the other two platforms in U.S. sales. Last month, Sony sold 378,000 PlayStation 3s, compared with 836,000 Xbox 360s and 2 million Wii machines sold, according to NPD Group.

Earlier this month, Microsoft said its Xbox 360 sales on the day after Thanksgiving, or Black Friday, jumped 25% from a year earlier and outsold PlayStation 3 by a three-to-one margin. Microsoft didn't mention Nintendo's Wii sales for Black Friday.

Still, Sony has benefitted from a U.S. videogames industry that boosted year-to-date sales through November 22% from a year earlier to $16 billion, according to NPD.

Sony cut its operating loss from its game division for the quarter ended Sept. 30 by about 60% by doubling both hardware and software sales related to PlayStation 3, while cutting production costs for the console, the company said in October.