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 Sony: $3.31B Lost in PlayStation 3 Cost, Pricing Gap

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PostSubject: Sony: $3.31B Lost in PlayStation 3 Cost, Pricing Gap   Tue Jun 24, 2008 7:20 am

Sony: $3.31B Lost in PlayStation 3 Cost, Pricing Gap

Disparity between the production cost of the PlayStation 3 and its retail price point caused Sony to lose roughly $3.31B over 2007 and 2008, Kotaku reports.
Outlining potential risk factors to investors, the company revealed in its fiscal 2008 annual report that by pricing the PlayStation 3 below production cost, the company shed $2.16B in 2007 and $1.16B in 2008. Sony added that its major investment in the early development and introductory phases of the PlayStation 3 "may not be fully recovered."

These research and development costs are typical in introducing a console to market, but the costs may prove unrecoverable if a platform "fail[s] to achieve such favorable market penetration... resulting in a significant negative impact on Sony's profitability," the company added.

Sony went on to remark that though it may eventually see a return on its investment, it's still possible that the company may end up in the red over the PlayStation 3's introductory period.

At the time of its initial launch, production costs of the PlayStation 3 were estimated at roughly $800 and $840 for the 20GB and 60GB models, respectively. Hardware revisions and cheaper availability of components have since driven production costs down by about a half of those initial figures.

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