According to a Merrill Lynch report, Sony could face a loss of up to $1.18 billion in the Playstation 3's first year on the market.The figures are based on a prediction of 14 million units sold, and Merrill Lynch's belief that the console will have a sale price of $399, with each one actually costing Sony $494 to manufacture.
The $494 manufacturing figure was broken down into individual items - the Cell processor, Nvidia RSX Chip and Blu-ray drive each were estimated to cost a little more than $100 to produce, with the other parts and production costs making up the remainder.
Gamedaily.com ask the question if Sony can weather such a high financial loss in the first year:
Even if Sony is counting on software sales, licensing fees with publishers and eventual mass production to help them recoup their losses, putting the business in the hole by more than $1 billion will make it far tougher for the PS3 to become a profitable venture. Furthermore, Merrill Lynch says that Microsoft could make things even harder on Sony by strategically cutting the price of the Xbox 360 to coincide with the debut of the PS3. If this were to happen, Merrill predicts that Sony could lose an additional 80 billion yen ($730 million) in the PS3's second year and 50 billion yen ($457 million) in its third year.
For the sake of comparison, the PlayStation 2 debuted at 39,800 yen in Japan and $299 here in the U.S. and over the first year of the console's life Sony lost 51.1 billion yen or about $458 million. The company went on to recover from that loss with a profit of $759 million in the second year, and then a profit of over $1 billion in the third year. However, recovering from a loss of $458 million—less than half the initial loss Merrill Lynch is forecasting—is a far more manageable task. It was also at a time when Sony's overall business was in better health.
Merrill Lynch: Sony to Lose Over $1 Billion in PS3's First Year - Kutaragi: People will "work more hours" to buy the PS3
Related:
PS3 To Be Even More Powerful Than We've Seen?
PS3 controller pic emerges, this time smaller?
No Decision Yet on PS3 Euro Release
Research claims PS3 to lose market share next year
PS3 Not a Toy, But a Linux Supercomputer
Discussion >>
Add Igniq.com to your MySpace Friends
