Monday, November 20, 2006

Someone needs to learn about variable costs and marginal revenue!

You remember hearing about the PS3 selling for an apparently outlandish starting price of $600?

Well, that's not the worst part of the price. Apparently, Sony will take a loss on each PS3 console sold of over $240 - over a 40% loss per console.

Sony is banking on a sizable return on investment of the actual game applications sold to recoup the losses, but frankly, this seems to be an incredibly stupid risk to take, especially in light of lower priced options available from Microsoft and Nintendo.

Hell, Microsoft can never get ANYTHING right, and yet they would actually be close to break-even from each XBOX 360 sale once marketing, publicity, and such are added. Adding those costs in for Sony only makes the discrepancy worse.

In light of the breakdown of supply costs, perhaps it's safe to say that while the PS3 has incredible processing power, perhaps it's a bit too much to swallow for consumer and company alike.


Big Daddy Jeff said...

Wow. That's amazing. I heard the games will sell for $60 a pop though. That only means selling 5 or so per player, assuming a low product cost on those things. Most of the people I know who are into PlayStation have 20 games or more. So I still wouldn't bet against Sony. There's a reason the Japanese control a good chunk of American business. They tend to be right on these gambles. We'll see.

Francase said...

They would probably need to sell at least 10-12 per console to get to break-even.